Buy These 3 Dividend Stocks to Hedge Against Rising Interest Rates

NEW YORK (TheStreet) -- The Federal Reserve is expected to raise interest rates this year. Rising interest rates reduce the value of real assets like homes and most stocks. Value declines as interest rates rise because investors can get a higher return on their cash, which makes competing returns from real estate and stocks less attractive by comparison.While it's true that most stocks see their value reduced by rising interest rates, there are a select group of stocks that actually benefit from rising interest rates. These stocks have large amounts of cash invested in short-term interest-bearing securities. When interest rates rise, they benefit as earnings increase due to rising yields on their short-term cash. Banks, insurance companies, and payroll companies all have large pools of cash that are often invested in short-term debt securities. Text Ads Banks benefit from the spread on the interest yield they pay depositors and the interest yield they get from investing depositors money. Insurance companies will see earnings rise from their invested float -- premium revenue that has been collected and is being held until claims come in and the insurance company has to pay out. Payroll companies also have a large float as well as they take prepayments from companies for payroll and hold it until they must pay it out when employee payroll comes due. Pakistan Market Subscribe Free Foreign Market News

Courtesy: Your Keywords Here

Disclaimer: All information on this page are taken from third party reliable sources of relevant industry channels, with simple aim just for general information for our users. todaypricelist.blogspot.com never endorse or recommend for any trading or Purchasing advice as well as accuracy of data provided here.