What If the Fed Doubles the Rate Hike in December? These 5 Dividend Stocks Could Prosper
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The Federal Reserve heads into its December 8-9 meeting with the upper bound of the federal funds target range at 4.00%. That level reflects a September 17 increase from 3.75%. Prediction markets put the odds of a standard quarter-point hike in December at 90.5%. They price a half-point move or larger at just 7.55%, which keeps the bigger hike the less likely outcome.
The larger move still has supporters. In comments reported November 12, the Fed’s Waller said he leans toward a quarter point but would consider 50 bps if October inflation comes in hot. On November 11, Ed Yardeni of Yardeni Research backed a 50-point December hike.
Inflation is driving the debate. Consumer prices ran 3.7% above year-ago levels in the latest reading, and the 10-year Treasury yield stood at 5.1% on November 12. For income investors at or near retirement, a doubled hike would favor two kinds of companies: those whose earnings rise with rates and those whose cash flow holds steady when growth slows down (we laid out how to turn a nest egg into a monthly paycheck, including the mix and withdrawal order, in a free guide here: The Paycheck Portfolio Method). The five dividend payers below are ranked by how directly higher rates feed their earnings.
1. JPMorgan Chase (JPM)
JPMorgan Chase (NYSE: JPM | JPM Price Prediction) yields 1.8%. Banks earn the gap between what borrowers pay on loans and what they pay depositors. That gap is called net interest margin. When rates rise, loan yields usually reset faster than deposit costs, widening the gap. JPMorgan’s average loans rose 10% year over year. In October, CFO Jeremy Barnum said the bank remains “asset-sensitive” and guided to fourth-quarter net interest income of about $28 billion.
JPMorgan raised its quarterly dividend to $1.65 from $1.50. A bigger hike could slow down loan demand and push credit losses higher. Barnum warned, “If you keep real rates very, very high for a long time… it is hard to imagine that would not have an impact on the consumer.” Third-quarter credit costs already reached $2.7 billion.
2. PNC Financial Services (PNC)
PNC Financial Services (NYSE: PNC) yields 3.07%. Its own outlook calls for Fed hikes in December and March, which would bring fed funds to 4.25%-4.50%. PNC holds $240.03 billion in commercial and industrial loans, and the floating-rate portion of that book reprices higher as yields rise. Third-quarter net interest income rose 15% year over year. CFO Robert Reilly said PNC remains “well positioned for a rising-rate environment.”
In July, PNC raised its quarterly dividend to $2.00 from $1.70. Deposit costs can rise quickly during a hiking cycle. The rate PNC paid on interest-bearing deposits rose 7 basis points to 1.98% in the third quarter. Reilly expects the cumulative deposit beta, meaning the share of rate increase the bank passes on to depositors, to settle in the mid-50s.
3. Prudential Financial (PRU)
Prudential Financial (NYSE: PRU) yields 4.51%, the highest in this group. Insurers collect premiums and invest them in bonds until claims come due. When yields rise, each new premium dollar earns more. In the second quarter, Prudential cited “higher net investment spread results across multiple segments,” and adjusted EPS of $4.08 beat the $3.52 estimate.
The quarterly dividend is $1.40, and the ex-dividend date is November 24. Investors must own shares before that date to receive the payment. Rising rates could lower the market value of the bonds Prudential already holds. The company also faces an ongoing voluntary sales suspension in Japan.
4. Exxon Mobil (XOM)
Exxon Mobil (NYSE: XOM) yields 2.51%. The Fed usually increases rates aggressively to fight persistent inflation, and integrated oil companies tend to generate strong free cash flow in that setting. Exxon produced $19.10 billion of free cash flow in the third quarter, cut net debt to $22.1 billion, and plans $20 billion in buybacks for 2027. CEO Darren Woods said, “Advantaged investments, technology, and $16.9 billion in structural cost savings since 2019 are expanding our earnings power.”
Exxon raised its quarterly dividend to $1.07 from $1.03, continuing its record of 44 consecutive years of annual increases. The ex-dividend date is November 16. A hike strong enough to slow down the economy could weaken oil demand and prices, along with refining margins and chemical demand.
5. Colgate-Palmolive (CL)
The defensive anchor of this group is Colgate-Palmolive (NYSE: CL), which yields 2.14%. Households keep buying toothpaste, soap, and pet food even when budgets tighten. Pricing added 2.0% to third-quarter organic growth of 3.6%. Base business gross margin expanded to 60.3%, and Colgate raised its full-year base business EPS growth guidance to 5%-7%. It holds 41.4% of the global toothpaste market.
The quarterly dividend is $0.53. Higher bond yields could make that payout look less competitive. In October, Jim Cramer warned that as the Fed tightens, “high-yielding dividend stocks are going to be among the worst performers because suddenly they’ve got some serious competition from fixed income.”
How These Dividend Payers Line Up for a More Aggressive Fed
Each of these five companies would benefit from a half-point hike in a different way. JPMorgan and PNC would earn wider lending margins, and Prudential would reinvest premiums at higher yields. Exxon’s cash flow tends to keep pace with inflation, while Colgate offers steady demand if consumers pull back. Each also carries a matching risk: rising deposit costs, falling bond values, weaker oil demand or tougher competition from Treasury yields. Markets still see a quarter-point move as the far likelier outcome, so October inflation data is the key number to track ahead of the December 8-9 meeting.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
