As interest rates have risen in anticipation of a Federal Reserve rate hike later this year, yield-oriented equities have suffered. But not all high-dividend stocks will respond in the same way to rising rates. To help sort the wheat from the chaff, Morgan Stanley issued a new report Monday, which lists sectors and individual stocks to buy and avoid as rates rise.
Standouts include real estate investment trusts, which offer stability and some upside because they are undervalued, and master limited partnerships, which are noted for their fast free cash flow growth. The highest ranked stocks in the report, which takes into account risk and valuation relative to triple-B rated bonds, include: Health Care REIT (HCN) It has a 5% dividend and an expected 32% return. Liberty Property Trust (LPT) It has a 5.7% dividend and an expected 28% return. Simon Property Group (SPG) It has a 3.6% dividend and an expected 24% return.
Source: Baron's
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