The Fed's Curb on Rate Hikes Could Be a Boon for These Dividend-Paying Stocks - What You Need to Know

While the Federal Reserve may not be done with aggressive monetary policy yet, a pause in rate hikes should help dividend-paying consumer staples .

These stocks, known for their high dividend yields and stable activity, have fallen out of favor this year and are lagging behind riskier technology and discretionary stocks, according to a report by Bloomberg.

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Arun Sundaram, vice president of equity research at CFRA, said a potential dollar decline is still poised to support core businesses in the second half of 2023. "If the dollar holds where it is or continues to depreciate, the companies that stand to gain the most from it will be companies like Mondelez International Inc MDLZ, Colgate-Palmolive Company CL, Coca-Cola Co KO, Procter & Gamble Co PG and Kimberly Clark Corp KMB,” Sundaram told Bloomberg.

Despite optimism about a tariff break, the core consumer group still doesn't seem out of the woods. For example, shares of Campbell Soup Company CPB fell after the company kept its annual guidance unchanged, according to the report. Although Americans are still willing to shell out more for diapers, sodas and other daily necessities at the start of the year, Campbell Soup reported that shoppers are increasingly unwilling to put up with price hikes for drinks and snacks. snacks, adds the report.

Expert Opinion: Quincy Krosby, chief global strategist at LPL Financial, told Bloomberg that while dollar strength has peaked, S&P 500 core companies that are pulling some of their overseas sales could benefit.

"Remember when the dollar was at its peak, all we heard during earnings season was how much it was hindering their ability to do well," said Krosby. "Now we are on the road to the other extreme with the loosening of the dollar."

The dollar will fall if the central bank decides to end its tightening cycle. Traders are factoring in a dovish policy in June with a 74.8% chance the Fed won't raise rates this time, according to the CME FedWatch Tool.

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