One Fed Governor Sees Half-Point Cut in December: Our Top 7% and 8% Dividend Stock Picks

Just as we grew accustomed to the likelihood of a third federal rate cut in December, some inflation data and a host of other factors led some on Wall Street to call for the Federal Reserve to hold off in December and perhaps wait until the first meeting in 2026. However, last week, we witnessed the most alarming piece of data we had seen in some time: a staggering 153,074 job cuts, the highest in over two decades, driven by the adoption of artificial intelligence (AI) and cost-cutting measures. Major tech and retail giants, including Amazon (NASDAQ: AMZN), UPS (NYSE: UPS), Intel (NASDAQ: INTC), and Target (NYSE: TGT), have announced significant layoffs. This in turn sparked Federal Reserve Governor Steven Miran to make a forceful case for a half-percentage-point interest rate reduction at the Federal Open Market Committee’s December meeting, arguing that recent economic indicators justify more aggressive monetary easing.

• With the dreadful layoff numbers from last month, the tables appear to have turned for a 50-basis-point rate cut in December.

• While most continue to predict a 25-basis-point cut, if any, more negative economic data between now and the end of the month could tilt the scales.

• Either way, continued rate cuts of any size could prove to be a solid tailwind for dividend stocks, especially those with higher yields, such as the 7% variety.

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Governor Miran went on to add that core PCE inflation has declined substantially toward the Fed’s 2% target while unemployment has ticked upward in recent months. He emphasized that the central bank should move preemptively to support economic momentum rather than risk waiting too long and allowing conditions to deteriorate further, while acknowledging that some of his colleagues on the committee prefer a more cautious quarter-point approach. He also said this: “A 50 basis point reduction would still leave us in restrictive territory, but it would demonstrate our commitment to achieving both sides of our dual mandate.”

One thing is sure: if the Fed were to implement a 50-basis-point increase, it would likely come as a shock to the market and could ignite an end-of-year Santa Claus rally. Now is the perfect time to buy our four favorite 7% dividend stocks, all of which are Buy-rated at top Wall Street firms we follow.

Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations. A study by Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks have delivered an annualized return of 9.18% over the past 50 years (1973-2023). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).

Altria Group Inc. (NYSE: MO) is one of the world’s largest producers and marketers of cigarettes and other tobacco-related products. This stock offers value investors a compelling entry point, along with a generous dividend yield of 7.09%. Altria manufactures and sells smokable and oral tobacco products in the United States.

The company’s dividend payout is based on free cash flow, ranging from about 64% to 80% per quarter. In recent quarters, free cash flow has exceeded dividend payments, providing a solid buffer. Altria generates strong cash flow from its core tobacco business, which provides a stable base, albeit with regulatory risk, and yields are among the highest in the S&P 500, at least for now.

The company primarily sells cigarettes under the Marlboro brand, as well as:

• Cigars and pipe tobacco, principally under the Black & Mild and Middleton brands

• Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands

• on! Oral nicotine pouches

• e-vapor products under the NJOY ACE brand

It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.

Altria used to own over 10% of Anheuser-Busch InBev S.A. (NYSE: BUD), the world’s largest brewer. Last year, the company sold 35 million of its 197 million shares through a global secondary offering. That represents 18% of its holdings but still leaves 8% of the outstanding shares in its back pocket. Altria also announced a $2.4 billion stock repurchase plan partially funded by the sale.

Goldman Sachs has a Buy rating with a $72 target price.

Apple Hospitality REIT Inc. (NYSE: APLE) owns one of the largest portfolios of upscale, select-service hotels in the United States. It is a publicly traded real estate investment trust that pays a solid 8.15% monthly dividend and stands out in the market with its unique offering.

The company has 224 hotels with more than 30,066 guest rooms across 87 markets in 37 states, plus one property leased to third parties. Its hotel portfolio includes 100 Marriott-branded hotels, 119 Hilton-branded hotels, and five Hyatt-branded hotels. They are operated and managed under separate management agreements with 16 hotel management companies, including:

• Hilton Garden Inn

• Hampton

• Courtyard

• Residence Inn

• Homewood Suites

• SpringHill Suites

• Fairfield

• Home2 Suites

• TownePlace Suites

• AC Hotels

• Hyatt Place

• Marriott

• Embassy Suites

• Aloft

• Hyatt House

Apple Hospitality hotels are in various states, including Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Michigan, and others.

Cantor Fitzgerald has an Overweight rating with a target price of $14.

This top master limited partnership is one of North America’s largest and most diversified midstream energy companies. Energy Transfer L.P. (NYSE: ET) is a safe option for investors seeking energy exposure and income, as the company pays a substantial 7.91% distribution. It owns and operates one of the largest and most diversified portfolios of energy assets in the United States. It has a strategic footprint in all the major domestic oil and gas production basins.

Energy Transfer operates one of the largest integrated midstream systems in the U.S., with nearly 107,000 miles of natural gas pipelines and 235 billion cubic feet (Bcf) of storage capacity. Its strong presence in Texas, particularly in the Permian Basin, provides it with access to some of the country’s most affordable natural gas. The company is receiving significant inquiries for pipeline projects to serve power plants (45 plants across 11 states) and data centers (over 40 prospective projects), with potential demand exceeding 5 Bcf/d for power plants and 3 Bcf/d for data centers.

The company is a publicly traded limited partnership with core operations that include:

• Complementary natural gas midstream, intrastate, and interstate transportation and storage assets

• Crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets

• NGL fractionation

• Various acquisition and marketing assets

Following the acquisition of Enable Partners in December 2021, Energy Transfer owns and operates over 114,000 miles of pipelines and related assets in 41 states, spanning all major U.S. producing regions and markets. This further solidifies its leadership position in the midstream sector.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG Company; the general partner interests, incentive distribution rights, and 28.5 million standard units of Sunoco L.P. (NYSE: SUN); and the public partner interests and 39.7 million standard units of USA Compression Partners L.P. (NYSE: USAC).

Barclays has given the stock a Buy rating with a target price of $25.

Chevron acquired a 37.5% stake in Hess Midstream L.P. (NYSE: HESM) when it completed the purchase of Hess back in the summer. With a stellar 8.77% dividend on a sprawling midstream asset base, this is an incredible stock to consider now. Hess Midstream owns, operates, develops, and acquires a diverse set of midstream assets to provide services to the company and its third-party customers.

The company owns oil, gas, and water handling assets located in the Bakken and Three Forks Shale plays of the Williston Basin area in North Dakota. Its gathering segment includes Hess North Dakota Pipeline Operations and Hess Water Services, which owns natural gas gathering and compression, crude oil gathering, and produced water gathering and disposal.

The processing and storage segment includes Hess TGP Operations and Hess Mentor Storage, which owns the Tioga gas plant, an equity investment in the LM4 Joint Venture, and the Mentor storage terminal.

Hess Midstream’s terminaling and export segment includes Hess North Dakota Export Logistics Operations, which owns:

Raymond James has an Outperform rating with a $35 price objective.

Is a Market Correction Coming? Better Grab Five of the Safest Dividend Kings Now

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