The US central bank has taken a bold step, slashing interest rates by a half percentage point to ease pressure on consumers and potentially lead to lower credit card and mortgage rates. This move marks a significant shift in policy, as the Federal Reserve aims to reach its 2% inflation target. The rate cut, the first since March 2020, brings the key funds rate to a range of 4.75% to 5.0%.
In response to this new landscape, investors are seeking guidance on where to invest. Wells Fargo analyst Donald Fandetti recommends exploring REITs and specialty finance sectors, which historically thrive in rate-cutting cycles and offer attractive dividend yields. Two stocks in particular stand out for their high dividend yields and strong performance potential.
Annaly Capital Management, a REIT with a focus on residential real estate and mortgage-backed securities, boasts a diversified capital management strategy designed to generate durable returns across varying economic and interest rate cycles. The company’s long-standing dividend payment policy, with a history dating back to the 1990s, offers investors a reliable income stream. With a forward yield of 12.8%, Annaly’s dividend is supported by its earnings available for distribution.
AGNC Investment, another REIT with a focus on mortgage-backed securities, offers a monthly dividend payment, providing investors with a steady return. The company’s portfolio is valued at $66 billion, with over 90% invested in Agency MBSs. AGNC’s forward yield of 13.9% makes it an attractive choice for income-seeking investors.
Both Annaly and AGNC have received Strong Buy ratings from the analyst consensus, with Fandetti upgrading his ratings on both stocks due to their historical performance in rate-cutting cycles and their potential for improved value going forward. With the combined upside and dividend return potential on these stocks, investors may be wise to consider adding them to their portfolios.
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