The Federal Reserve started raising interest rates almost two years ago. While it is likely that we have seen the last of the rate hikes, it could be a long time before the current rates at 5.25% to 5.50% start to come down. Spiking inflation in January at the consumer and producer level put the kibosh on the anticipated March cuts, and while many now point to the summer for a rate cut, a raging stock market, and strong employment readings could push the highly anticipated event to the fall.

With the market starting to wobble after a massive run since last October, it may be time for dividend investors to check out the stocks in the Dividend Aristocrats that will benefit from a decline in rates later this year.

Often, when income investors look for defensive companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 68 companies that made the cut for the 2024 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the dividend aristocrats list:

• Companies must be worth at least $3 billion each quarterly rebalancing
• Average daily volume of at least $5 million transactions for every trailing three-month period at every quarterly rebalancing date.
• Be a member of the S&P 500

We screened the highest-yielding Dividend Aristocrats list and found five top companies that were hit as rates rose over the last two years and may be ready to explode higher when they start to fall later this year. All are rated Buy by top firms on Wall Street.

Atmos Energy

This utility stock struggled some last year but is perfect for conservative accounts looking for income and pays a 2.83% dividend. Atmos Energy Corp. (NYSE: ATO) and its subsidiaries engage in the regulated natural gas distribution and pipeline and storage businesses in the United States.

It operates in two segments:

• Distribution 
• Pipeline and Storage

The Distribution segment is involved in the eight states’ regulated natural gas distribution and related sales operations. This segment distributes natural gas to approximately 3.3 million residential, commercial, public authority, and industrial customers. The company owns 73,243 miles of underground distribution and transmission mains.

The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties, manages five underground storage reservoirs in Texas, and provides ancillary services customary to the pipeline industry, including parking arrangements, lending, and inventory sales. As of September 30, 2023, it owned 5,645 miles of gas transmission lines.

Consolidated Edison

This old-school utility stock offers income investors the stability and track record many seek now and a solid 3.79% dividend. Consolidated Edison Inc. (NYSE: ED), through its subsidiaries, engages in the regulated electric, gas, and steam delivery businesses in the United States.

It offers services to approximately:

• 3.6 million customers in New York City and Westchester County
• Gas to about 1.1 million customers in Manhattan, the Bronx, parts of Queens, and Westchester County
• Steam to approximately 1,530 customers in parts of Manhattan

The company also supplies electricity to approximately 0.3 million customers in southeastern New York and northern New Jersey and gas to about 0.1 million customers in southeastern New York.

In addition, it operates:

• 543 circuit miles of transmission lines
• 15 transmission substations
• 63 distribution substations
• 87,951 in-service line transformers
• 3,869 pole miles of overhead distribution lines
• 2,320 miles of underground distribution lines
• 4,359 miles of mains
• 377,741 service lines for natural gas distribution

Consolidated Edison owns, develops, and operates renewable and energy infrastructure projects, provides energy-related products and services to wholesale and retail customers, and invests in electric and gas transmission projects.

Essex Property Trust

This stock has rallied off 2023 lows, and is an outstanding way for investors to add an inflation-busting real estate position that pays a hefty 3.97% dividend. Essex Property Trust Inc. (NYSE: ESS) is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets.

Essex has ownership interests in 252 apartment communities comprising approximately 62,000 apartment homes, with an additional property in active development.

Federal Realty Investment Trust

While real estate has been hit, hard assets are good when inflation spikes, and this stock pays a large 4.39% dividend. Federal Realty Investment Trust (NYSE: FRT) is a recognized leader in the ownership, operation, and redevelopment of high-quality retail-based properties located primarily in major coastal markets from Washington, D.C., to Boston, San Francisco, and Los Angeles.

Federal Realty’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply.

Its expertise includes creating urban, mixed-use neighborhoods like:

• Santana Row in San Jose, California
• Pike & Rose in North Bethesda, Maryland
• Assembly Row in Somerville, Massachusetts

Federal Realty’s 102 properties include approximately 3,300 tenants in 26 million square feet tenants and over 3,100 residential units. Federal Realty has increased its quarterly dividends to its shareholders for 56 consecutive years, the longest record in the REIT industry.

NextEra Energy

With a solid balance sheet, this company looks poised for a solid 2024 and pays a strong 3.64% dividend. NextEra Energy Inc. (NYSE: NEE), through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America.

The company generates electricity through:

• Wind
• Solar
• Nuclear
• Natural gas
• Other clean energy

It also develops, constructs, and operates long-term contracted assets comprising:

• Clean energy solutions, such as renewable generation facilities
• Battery storage projects
• Electric transmission facilities
• Sells energy commodities
• Owns, develops, constructs, manages, and operates electric generation facilities in wholesale energy markets

The company has approximately 33,276 megawatts of net generating capacity, approximately 90,000 circuit miles of transmission and distribution lines, and 883 substations.

It serves roughly 12 million people through approximately 5.9 million customer accounts in Florida’s east and lower west coasts.

Realty Income

This is another ideal stock for growth and income investors looking for a safer contrarian idea for the rest of 2024 that pays a whopping 5.87% dividend. Realty Income Corp. (NYSE: O) provides stockholders with dependable monthly income.

The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants.

The company has declared 640 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 122 times since Realty Income’s public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

 

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