There was no surprise Wednesday when the Federal Reserve announced that the federal funds rate was being lifted 50 basis points. In addition, Fed Chair Jay Powell laid out the case that many across Wall Street have expected. Additional 50 basis point hikes are probably on the way in June and July, while the Federal Reserve balance sheet runoff begins in June to lower the staggering $8.5 trillion amount that resides on the books at the Fed.

While certain sectors tend to do well in a rising interest rate environment, most tend to underperform. We screened the S&P 500 stocks looking for those that pay the highest dividends in the venerable index and look like they can do well if we have a seismic downturn.

We found seven companies that are all rated Buy at Wall Street at major firms and look like incredible ideas in a very shaky market. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.

Shareholders receive a 6.49% dividend. Deutsche Bank team has a $60 target price on Altria stock, and the consensus target is $57.04. The stock closed on Wednesday at $56.40.

AT&T

The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.

Its Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.
AT&T also provides data, voice, security, cloud solutions, outsourcing and managed and professional services, as well as customer premises equipment for multinational corporations, small and midsized businesses, and governmental and wholesale customers. In addition, it offers broadband fiber and legacy telephony voice communication services to residential customers.

The company markets its communications services and products under the AT&T, Cricket, AT&T Prepaid and AT&T Fiber brand names. The company’s Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brand names.

AT&T stock investors receive a 5.74% dividend. The Raymond James target price is $26, while the consensus target is $24.64. The stock closed on Wednesday at $19.95.

IBM

This blue-chip giant still offers investors an incredibly solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions.

Its Software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solution. It also offers software for business automation, AIOps and management, integration and application servers; data and artificial intelligence solutions; and security software and services for threat, data and identity. This segment also provides transaction processing software that supports clients’ mission-critical and on-premise workloads in banking, airlines and retail industries.

The Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services, as well as technology consulting services and application and cloud platform services.

The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads, support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment.

Last month, IBM posted stellar first-quarter earnings that beat estimates on the top and bottom lines as the company continues to make progress on its huge restructuring initiative.

Investors receive a 4.98% dividend. The BofA Securities price target of $165 compares with a $144.16 consensus target for IBM stock. Wednesday’s closing print was $137.40.

This is one of the largest natural gas infrastructure companies in the world. Kinder Morgan Inc. (NYSE: KMI) operates through the following segments.

The Natural Gas Pipelines segment owns and operates interstate and intrastate natural gas pipelines and underground storage systems; natural gas gathering systems and natural gas processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and liquefied natural gas liquefaction and storage facilities.

The Products Pipelines segment owns and operates refined petroleum products and crude oil and condensate pipelines, as well as associated product terminals and petroleum pipeline transmix facilities.

The Terminals segment owns or operates liquids and bulk terminals that store and handle various commodities, including gasoline, diesel fuel, chemicals, ethanol, metals and petroleum coke. It also owns tankers.

The CO2 segment produces, transports and markets CO2 to recover and produce crude oil from mature oil fields, and it owns interests in or operates oil fields and gasoline processing plants, as well as operates a crude oil pipeline system in West Texas. It owns and operates approximately 83,000 miles of pipelines and 144 terminals.

Shareholders receive a 5.94% dividend. The $22 Truist Financial target price is higher than the $20.26 consensus figure. Kinder Morgan stock closed at $19.28 on Wednesday.

ONEOK

The solid price of natural gas over the past year has helped to lift this top energy company. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and NGLs gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying MLP, ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.

Many on Wall Street remain very positive on the company’s primarily fee-based earnings, which account for 90% of total earnings.

Investors in ONEOK stock receive a 5.74% dividend. Truist Financial has set a $78 price target. The consensus target is $71.50, and shares closed on Wednesday at $67.35.

Shares of this leading company have been pounded and are offering the best entry point since last year. Simon Property Group Inc. (NYSE: SPG) is a very strong company for investors looking to play the industry. It invests in real estate markets across the globe. It engages in investment, ownership, management and development of properties. The company primarily invests in regional malls, premium outlets, mills and community/lifestyle centers to create its portfolio.

Through its subsidiary partnership, Simon Property owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European real estate investment trust with over 260 shopping centers in 13 countries.

Shareholders receive a 5.46% distribution. The Simon Property stock price target at Deutsche Bank is $170. The consensus target of $163.82 is also well above Wednesday’s close at $124.58.

Vornado Realty Trust

Sporting a sizable dividend and offering investors a great inflation-hedging real estate play, this top stock is an incredible buy now. The Vornado Realty Trust (NYSE: VNO) portfolio is concentrated in the nation’s key market New York City, along with additional premier assets in both Chicago and San Francisco. It is the real estate industry leader in sustainability policy, owning and managing over 23 million square feet of LEED-certified buildings.

The company posted strong results and beat the Wall Street estimates for the quarter that ended March, as signage and building services income improved. Madison Square Gardens’ 428,000 square foot renewal at the PENN2 redevelopment has driven strong leasing spreads. Occupancy and same-store net operating income also improved.

Shareholders receive a 5.48% dividend. The Truist Financial price target is $46. The consensus target is $44.36. The final Vornado Realty Trust stock trade on Wednesday was at $38.12.

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These seven stocks should all hold up better in a sharp sell-off than high-beta momentum stocks will. They all provide goods and services that are needed or wanted almost regardless of prevailing economic conditions, and all are very strong players in their respective sectors.

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