With the Federal Reserve anticipated to renew its rate-cutting cycle on Wednesday, buyers might begin trying for new income alternatives in dividend-paying stocks. The market is pricing in 100% odds that the central financial institution decreases charges at its assembly, with the bulk anticipating a 25 foundation level — or 0.25 share level — minimize, in accordance with the CME FedWatch device . As a outcome, yields on money devices like cash markets and short-term bonds ought to begin to come down. Bond yields transfer inversely to costs. Falling bond yields typically make dividend payouts look comparatively more enticing. Dividends are additionally a good approach to keep invested by means of any uncertainty, in accordance with Morgan Stanley. “In periods of elevated risks and valuations, dividends become [a] more important part of investors’ total returns, dampening volatility and providing some support to stock prices,” strategist Todd Castagno wrote in an Aug. 14 notice. “Slower growth and a declining interest rate environment also make durable, higher yielding dividends relatively more attractive as cash and fixed income become less lucrative.” Still, buyers should not focus merely on stocks with the best dividends since elevated yields may be a signal of misery inside the firm. Instead, many concentrate on dividend progress. Morgan Stanley’s analysis has discovered that six months after firms announce a dividend increase, their stocks outperformed by a median 3.1%, Castagno famous. Investing in dividend aristocrats is a method to make sure you are getting dividend growers, for the reason that index consists of S & P 500 firms which have boosted payouts in every of the previous 25 years. The exchange-traded fund that tracks the efficiency of that index is ProfessionalShares S & P 500 Dividend Aristocrats ETF . NOBL YTD mountain ProfessionalShares S & P 500 Dividend Aristocrats ETF yr so far The ETF has a 2.46% dividend yield and an expense ratio of 0.35%. In distinction, the S & P 500 yields. 1.12%. The fund’s prime holdings embrace C.H. Robinson Worldwide , Lowe’s and AbbVie . Not simply ‘aristocrats’ Still, there are dividend stocks that won’t meet the index’s strict 25-year standards of dividend progress that are nonetheless a purchase, a number of buyers informed CNBC. “For us, that’s a little old,” Jack Ablin, chief funding strategist at Cresset, mentioned of the 25-year customary. For occasion, Apple would not qualify, he famous, because it reinstated its dividend in 2012. Ablin focuses on dividend growers, albeit with a shorter monitor file than dividend aristocrats, that are additionally high-quality firms. “These are companies that have had a long track record of maintaining and growing their dividends over time,” he mentioned. “Historically, if their payout ratio stays roughly constant, then earnings typically outpace inflation.” Not solely does Ablin take a look at cash-flow technology when selecting stocks, he considers leverage ratios, which measures the extent to which a firm makes use of debt to finance its enterprise. “We are looking at adequate liquidity and then companies that are in … less cyclical businesses as well, with reasonable profit margins,” he famous. “We want companies to be able to sustain themselves through recessions and expansions alike.” Examples embrace names like Chubb and Cardinal Health , he mentioned. The former has a 1.41% dividend yield and is down 1.7% yr so far, whereas the latter yields 1.36% and is up 26% to this point this yr. CAH YTD mountain Cardinal Health yr so far Capital appreciation additionally issues Investors additionally should not lose sight of potential capital appreciation. Kevin Simpson, founder and chief government officer of Capital Wealth Planning, focuses on dividend-growth stocks in his shoppers’ portfolios and customarily prefers a five-year historical past of payout will increase. “If you take that a little bit further, and you think that the dividends are growing because their earnings are increasing, then generally speaking, you should see share price appreciation at some point if you’re investing in a company that’s increasing its earnings,” he added. Dividend growers additionally are usually leaders of their subsectors, having demonstrated capital self-discipline when it comes to reinvesting of their enterprise and producing stockholder payouts, mentioned Matt Quinlan, portfolio supervisor at Franklin Templeton. He’s co-lead supervisor of the Franklin Rising Dividends Fund . “Those are attributes that should help a company realize capital appreciation over time,” he mentioned. “At the same time, companies that can grow their dividends or have an attractive dividend profile also tend to be more resilient and that helps provide downside capture and tougher markets.” FRDPX YTD mountain Franklin Rising Dividends Fund yr so far. Financial stocks Quinlan sees alternatives inside the monetary sector nowadays. For one, banks which have enterprise in capital markets are benefiting from a rise in exercise, he mentioned. Financials will additionally profit from deregulation and a decide up in enterprise exercise that ought to come from rate decreases, he famous. Plus, client spending is resilient, he added. “We’re also seeing some really good dividend growth,” Quinlan mentioned, pointing to hikes over the summer season in response to passing the Fed’s stress exams. “That’s because they’re growing and they’ve got a strong capital basis.” The Franklin Rising Dividends Fund holdings embrace Morgan Stanley and Charles Schwab . Morgan Stanley yields 2.55% and has gained 24% yr so far. Charles Schwab has a 1.17% dividend yield and has climbed 23% to this point this yr. MS YTD mountain Morgan Stanley yr so far Simpson’s prime picks Simpson additionally likes some monetary names, together with JPMorgan and Goldman Sachs . Both stocks have already executed nicely and may proceed to take action “because there is such profitability,” mentioned Simpson. JPMorgan has a 1.81% dividend yield and is up 29% to this point this yr, whereas Goldman yields 2.03% and has gained 37% yr so far. Home Depot , which has a dividend yield of two.18%, can also be a gorgeous alternative, Simpson mentioned. HD YTD mountain Home Depot yr so far Not solely does it have sturdy dividend progress, it needs to be a huge beneficiary of decrease charges, he famous. “The residential homeowner may look at lower rates for HELOCs [home equity lines of credit] so that they can do things that maybe they haven’t done since the pandemic — floor coverings, appliances, additions,” he mentioned. Plus, the house enchancment retailer has a sturdy enterprise on the industrial facet, which ought to profit in a pickup from skilled actual property buyers upgrading properties, he mentioned. Shares of Home Depot have risen more than 8% yr so far. (Learn the most effective 2026 methods from contained in the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and information right here .)