With the Federal Reserve’s decision on interest rates just days away, traders are still trying to determine the best way to position their portfolios ahead of a possible September rate hike. In a new report, HSBC analyst Volker Borghoff explained why dividend stocks are the best way to go.

Unique Cycle

There is a fear in the market that rising interest rates could pose a threat to high-yielding dividend (HYD) stocks because they offer the prospect of safer fixed-income returns for investors. However, Borghoff pointed out that this particular tightening cycle might not see the same substantial move in long-end rates that past cycles have seen.

He added that HYD stocks have underperformed the market for more than two years now. “Low growth and superior value characteristics are other positive factors in this environment,” Borghoff explained.

Projections

HSBC is not expecting…

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