Converging forces are pushing rates higher in 2026. The Iran conflict closed the Strait of Hormuz, spiking crude oil prices and raising production and transport costs. This energy shock drove inflation higher, with the Consumer Price Index rising 3.8%, which was the sharpest increase in three years and well above the Federal Reserve’s 2% target. This, in turn, has prompted lenders to demand higher rates to protect returns. Meanwhile, investors sold bonds amid rising inflation and concerns about U.S. debt, lifting Treasury yields. Since mortgage rates are based on the 10-year Treasury yield plus a risk premium, they rose in tandem. On the fiscal side, federal interest payments now exceed spending on Medicaid, national defense, and all nondefense discretionary programs combined, adding further upward pressure on long-term borrowing costs. Experts say rates will only fall if geopolitical tensions ease, oil prices stabilize, and inflation remains under control, outcomes that remain uncertain at best.
Typically, when interest rates go higher, these four sectors tend to win:
- Financials
- Energy
- Healthcare
- Industrials
We screened our 24/7 Wall St. dividend stocks database for quality companies that pay big, dependable dividends and generate reliable passive income. We found four companies, one in each sector, that are solid bets if the upward trend in interest rates remains in place. All are rated Buy by the top Wall Street firms we cover.
Financials
Financials are the biggest winner. Banks earn a wider spread between what they pay depositors and what they charge borrowers. Insurers earn more on their investment portfolios. The sector almost mechanically benefits from rising rates, as net interest income rises.
U.S. Bancorp
Based in Minneapolis, this super-regional financial giant is an outstanding choice for growth and income investors now, offering a hefty 3.56% dividend. U.S. Bancorp (NYSE: USB | USB Price Prediction) is a financial services holding company.
The bank’s segments are:
- Wealth
- Corporate
- Commercial and Institutional Banking
- Consumer and Business Banking
- Payment Services
- Treasury and Corporate Support
It offers a comprehensive range of financial services, including lending and deposit services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and ATM processing, mortgage banking, insurance, brokerage, and leasing.
The company’s banking subsidiary, U.S. Bank National Association (USBNA), is engaged in the banking business, principally in domestic markets. USBNA provides a range of products and services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions.
The non-banking subsidiaries offer investment and insurance products to customers primarily within their domestic markets, as well as fund administration services to a range of mutual and other funds.
Oppenheimer has assigned an Outperform rating with a target price of $74.
Energy
Energy benefits because rate hikes typically coincide with inflation, and oil/gas prices are a primary driver of inflation. Higher commodity prices translate to higher revenues. It is the inflation-hedge play and has been the strongest-performing S&P sector so far in 2026.
Enterprise Products Partners
This top American midstream natural gas and crude oil pipeline company is headquartered in Houston, Texas. Enterprise Products Partners (NYSE: EPD) is one of the most extensive publicly traded energy partnerships and pays a reliable 5.88% dividend. The company’s debt-to-EBITDA ratio ranges from 3.1x to 3.4x, which is moderate for a midstream energy company, and its interest coverage ratio is 5x.
Enterprise Products Partners generates strong free cash flow, with an operating cash flow of approximately $8.8 billion, resulting in approximately $4.2 billion in free cash flow annually after deducting capital expenditures. Another significant benefit for shareholders is that most of the corporate debt is fixed-rate, thereby limiting the risk of rising interest rates.
Enterprise Products Partners provides various midstream energy services, including:
- Gathering, processing, transporting, and storing natural gas, natural gas liquids (NGL), and fractionation
- Import and export terminalling
- Offshore production platform services
The company has four reportable business segments:
- Natural Gas Pipelines and Services
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services
One reason many analysts like the stock might be its distribution coverage ratio. The company’s coverage ratio is well above 1x, making it relatively less risky among the master limited partnerships.
Citigroup has a Buy rating with a $44 target price.
Healthcare
Pricing power and steady demand insulate the top healthcare names. They don’t directly benefit from higher rates, but they tend to hold up well because their earnings don’t erode as much as those of interest-sensitive sectors.
Bristol-Myers Squibb
Bristol-Myers Squibb (NYSE: BMY) is a global biopharmaceutical company discovering, developing, and delivering innovative medicines for patients with serious diseases across oncology, hematology, immunology, cardiovascular disease, neuroscience, and other therapeutic areas. It remains a solid pharmaceutical stock to own in the long term, offering an outstanding entry point with a reliable 4.45% dividend.
The company’s platforms comprise chemically synthesized or small-molecule drugs, including protein degraders, as well as biologics produced through biological processes. These platforms also encompass ADCs, CAR-T cell therapies, and radiopharmaceutical therapeutics.
Small-molecule drugs are typically administered orally in tablet or capsule form, although other drug-delivery mechanisms are also used. Biologics are usually administered by injection or intravenous infusion. CAR-T cell therapies are administered by intravenous infusion.
Bristol-Myers Squibb’s growth portfolio includes:
- Opdivo
- Opdivo Qvantig
- Orencia
- Yervoy
- Reblozyl
- Opdualag
Its legacy portfolio includes:
- Eliquis
- Revlimid
- Pomalyst/Imnovid
- Sprycel
- Abraxane
Bank of America has a Buy rating with a $67 target price.
Industrials
Industrial stocks often perform well in rising-rate environments because rate hikes can signal a strengthening and expanding economy. As businesses ramp up activity, demand for heavy equipment, machinery, and manufacturing capacity increases. This allows these cyclical companies to secure stronger order books and exercise greater pricing power, more than enough to offset their higher cost of capital.
Stanley Black & Decker
Stanley Black & Decker (NYSE: SWK) is the world’s largest tool company, with 50 manufacturing facilities in the United States and more than 100 worldwide. It trades at 13.54 times forward earnings estimates. With the potential for the economy to slow somewhat, you can bet that the do-it-yourself legions will fix rather than buy new, and this legendary stock is a solid idea now, while yielding a large 3.96% dividend.
Stanley Black & Decker provides hand tools, power tools, outdoor products, and related accessories in the United States, Canada, the 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 bits, screwdriver bits, router bits, abrasives, saw blades, and threading products
- Toolboxes, sawhorses, storage cabinets, and engineered storage solutions
- Electric and gas-powered lawn and garden products
This segment sells its products under such brand names as:
- DeWalt
- Craftsman
- Black+Decker
- Stanley
- Flex Volt
- Irwin
- Lenox
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
- Axle 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, and aerospace.
Barclays has an Overweight rating and a $95 target price on the shares.
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