Stop Waiting for “Rate Cuts.” Here’s How to Build an 8% Yield Portfolio Even if the Fed Holds Rates in December

Many investors believe further interest rate cuts in December are guaranteed. Dividend stocks like Plains All American Pipeline LP (NASDAQ:PAA | PAA Price Prediction), Hercules Capital (NYSE:HTGC), and TORM plc (NASDAQ:TRMD) can help you build a high-yield portfolio without going into Treasuries with less attractive yields today.

The Federal Reserve was shying away from cutting rates as the inflation slowdown stalled and started to reverse after tariffs.

Thankfully, tariffs have not led to a massive increase in inflation, and this has allowed the Fed to continue cutting. There have already been two rate cuts so far this year. The market puts a 93% chance that another interest rate cut will happen this December. The Federal Open Market Committee will meet on December 10 to decide whether or not to hold or cut.

Despite the market overwhelmingly expecting a cut, Powell has said that it is far from a foregone conclusion. If a report comes in that shows inflation getting worse or the labor market getting better without intervention, it might incentivize the Fed to pause.

But either way, you don’t have to wait for interest rate cuts to chase a higher yield. The best course of action may be to do it while rates are high, as that will put you ahead of the herd.

Plains All American Pipeline LP (PAA)

Plains All American Pipeline is a midstream company that transports and processes crude oil and natural gas liquids. The company does not directly have exposure to oil and gas prices. It makes money off the volume and has fee-based contracts that keep the cash flowing, rain or shine.

PAA stock is up 83.27% over the past five years, and that’s without counting the gargantuan dividend.

Midstream companies are seeing increased pipeline usage due to the long-term uptrend in energy demand plus booming exports from North America to Europe.

The forward dividend yield is 8.74%.

Hercules Capital (HTGC)

Hercules Capital is a business development company that is focused on venture lending. BDCs are known for having high dividend yields due to their tax structure. It requires them to distribute nearly all their income to shareholders.

As such, HTGC comes with a double-digit forward dividend yield of 10.23%. The forward payout ratio is 82.9% and the 5-year dividend growth rate is 4.56% annually.

One of the plus points with HTGC, compared to other BDCs, is that the stock itself has been on a long-term uptrend. Even if you discount the dividends entirely, HTGC stock has still returned 34.6% over the past five years.

The company recently received a Baa2 investment-grade rating upgrade from Moody’s. Q3 net interest income (or NII) grew 6.5% year-over-year, and could grow more with interest rate cuts. It is worth remembering that interest rate cuts could bring down some income for floating-rate loans, but that can be offset by the increased amount of loans. HTGC stock has held up well during previous rate cut cycles.

TORM plc (TRMD)

TORM plc is a shipping company that owns and operates tankers. These tankers transport oil and fuel, chemicals, gasoline, and more worldwide.

When discussing Plains All American Pipeline, I noted how there’s an ongoing boom in energy exports to Europe.

This post-2022 boom is because Europe has been aggressively pivoting from Eastern Europe to North America and the Middle East for its energy needs. These sources have proven to be far more stable for Europe. It does come with a big con: distance.

The most practical way to transport oil and gas from North America to Europe is through tankers. And for Middle Eastern tankers to get to Europe, they must pass through the geopolitically precarious Hormuz and Bab al-Mandab straits, for which tanker companies charge more.

Sanctions on Russia are not going away anytime soon. Even if the U.S. were to lift sanctions, European countries are likely to keep importing their energy from other sources. Thus, TRMD stock seems well-positioned to keep doing well over the long run and generate strong cash flow.

TRMD stock comes with an 11.73% forward dividend yield with a payout ratio of 78.02%.