While the December 2024 interest rate cut of 25 basis points may be the last until September, it is an excellent bet that federal funds will be lower than today’s effective federal funds rate of 4.33%, which is already below the long-term average of 4.61%. Investors seeking a total return that balances the need for passive income with the desire to add growth and combat inflation should focus on high-yield dividend stocks, which are expected to perform well when the Federal Reserve returns to a rate-cutting stance. Most on Wall Street believe we could see two or three rate cuts for the rest of 2025, depending on who is queried.
Why We Recommend the Dividend Kings
Companies that have raised their dividends for shareholders for 50 years or longer are the kind of investments that growth and income investors need to own. Dependability is crucial for individuals seeking to increase their annual income through dividend stock investments. The Dividend Kings are the 55 companies that have raised their dividends for 50 years, a testament to their dependability and reliability. Those are two “must-have” items for investors who rely on passive income to boost their overall revenue. Unlike the Dividend Aristocrats, the Dividend Kings do not have to be members of the S&P 500.
Four stocks that will benefit from Federal Reserve rate cuts are four of the highest-yielding Dividend Kings. All offer dependable passive income streams and solid growth potential, along with a degree of safety due to the high-altitude levels of the stock market. All four are rated Buy at top Wall Street firms.
Altria
Altria Group Inc. (NYSE: MO | MO Price Prediction) is one of the world’s largest producers and marketers of tobacco, cigarettes, and related products. This tobacco company offers value investors a compelling entry point and a generous dividend yield. Altria manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries.
The company provides cigarettes primarily under the Marlboro brand, as well as:
- Cigars and pipe tobacco, principally under the Black & Mild and Middleton brands
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- on! Oral nicotine pouches
- e-vapor products under the NJOY ACE brand
It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.
Altria used to own over 10% of Anheuser-Busch InBev S.A. (NYSE: BUD), the world’s largest brewer. Last year, the company sold 35 million of its 197 million shares through a global secondary offering. That represents 18% of its holdings but still leaves 8% of the outstanding shares in its back pocket. Altria also announced a $2.4 billion stock repurchase plan partially funded by the sale.
Stifel has a Buy rating with a $63 target price.
Black Hills
This off-the-radar multi-utility stock is a great idea for conservative investors. Black Hills Corp. (NYSE: BKH) serves 1.35 million natural gas and electric utility customers in eight states:
- Arkansas
- Colorado
- Iowa
- Kansas
- Montana
- Nebraska
- South Dakota
- Wyoming
Its segments include Electric Utilities and Gas Utilities.
The Electric Utilities segment generates, transmits, and distributes electricity to approximately 225,000 electric utility customers in Colorado, Montana, South Dakota, and Wyoming. Its Electric Utilities own 1,394 megawatts of generation and 9,196 miles of electric transmission and distribution lines.
Black Hills Gas Utilities segment serves over 1,128,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming.
The company’s Gas Utilities owns and operates 4,648 miles of intrastate gas transmission pipelines and 44,524 miles of gas distribution mains and service lines, seven natural gas storage sites, over 50,000 horsepower of compression, and 516 miles of gathering lines.
BMO Capital Markets has assigned an Outperform rating with a target price of $68.
Stanley Black & Decker
Stanley Black & Decker Inc. (NYSE: SWK) is the world’s largest tool company, with 50 manufacturing facilities in the United States and more than 100 worldwide. With the potential for the economy to slow down some, you can bet that the do-it-yourself legions will fix rather than buy new, and this legendary stock is a solid idea now, especially down almost 13% in 2025. Stanley Black & Decker provides hand tools, power tools, outdoor products, and related accessories in the United States, Canada, Other Americas, Europe, and Asia.
Its Tools & Outdoor segment offers professional-grade corded and cordless electric power tools and equipment, including:
- Drills
- Impact wrenches and drivers
- Grinders, saws, routers, and sanders
- Pneumatic tools and fasteners, such as nail guns, nails, staplers and staples, and concrete and masonry anchors; corded and cordless electric power tools
- Hand-held vacuums, paint tools, and cleaning appliances
- Leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels, and industrial and automotive tools
- Drill, screwdriver, router bits, abrasives, saw blades, and threading products
- Toolboxes, sawhorses, medical cabinets, and engineered storage solutions
- Electric and gas-powered lawn and garden products
This segment sells its products under these brand names:
- DeWalt
- Craftsman
- Cub Cadet
- Black+Decker
- Hustler
The company’s Industrial segment provides:
- Threaded fasteners, blind rivets and tools, blind inserts and tools
- Drawn arc weld studs and systems
- Engineered plastic and mechanical fasteners
- Self-piercing riveting systems
- Precision nut running systems
- Micro fasteners
- High-strength structural fasteners
- Axel swage, latches, heat shields, pins, couplings, fittings, and other engineered products
- Attachments used on excavators and handheld tools
The industrial segment sells its products through a direct sales force and third-party distributors to various industries, including automotive, manufacturing, electronics, construction, aerospace, and others.
UBS has assigned a Buy rating to the shares and a target price of $100.
Target
This American retail corporation operates a chain of discount department stores and hypermarkets. Target Corp. (NYSE: TGT) remains a solid and safe retail total return play, and after a rough first half of 2025, down almost 23%, it is a stellar buy. Target is a general merchandise retailer in the United States. It offers apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as jewelry, accessories, and shoes. The company also offers a range of beauty and personal care products, baby gear, cleaning supplies, paper products, and pet care products.
Target also provides:
- Dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, and food service
- Electronics, which includes video game hardware and software
- Toys, entertainment, sporting goods, and luggage
- Furniture, lighting, storage, kitchenware, small appliances, home décor, bed, and bath
- Home Improvement
- School/office supplies
- Greeting cards, party supplies, and other seasonal merchandise
In addition, the company sells merchandise through periodic design and creative partnerships, shop-in-shop experiences, and in-store amenities. It also sells its products through its stores and digital channels, including Target.com.
The company suffered a “Bud Light” moment a few years back after the disastrous merchandising of LGBTQ products, which struck a nerve among many shoppers. While not as severe as the beer giants’ conundrum, it was a significant negative that has seemingly subsided.
Guggenheim has a Buy rating, accompanied by a $115 target price.
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