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8 Stocks to Buy in a Low-Rate Environment

Wayne Duggan

More yield as rates decline.

The Federal Reserve issued an emergency interest rate cut in March to support the market in the wake of the coronavirus outbreak. The half-percentage-point reduction was the largest rate cut since the financial crisis in 2008. According to CME Group, the bond market is currently pricing in a 98.7% chance of at least another 0.5 in Fed rate cuts by the end of the year. Given interest rates are likely to continue to fall, here are eight high-yield dividend stocks to buy, according to analyst recommendations from Bank of America.

Simon Property Group (ticker: SPG)

Simon Property Group is a real estate investment trust, or REIT, that owns and operates regional shopping malls and premium outlet malls. The shopping mall business has been challenging in recent years to say the least, and Simon shares are down 32% overall in the past year. However, analyst Jeffrey Spector says Simon has a best-in-class balance sheet that will serve it well during a potential economic downturn. He says Simon's properties are top-tier assets, and the REIT pays an impressive 7% dividend yield. Bank of America has a "buy" rating and $165 price target for SPG stock.

Oneok (OKE)

Oneok is a natural gas gathering, transportation and storage company. Despite a brutal natural gas market in the past year, shares held up relatively well, gaining 4% overall. Analyst Derek Walker says Oneok's integrated midstream operations should prove resilient even during periods of economic volatility. Walker says Oneok is on track to execute several organic growth projects, delever its balance sheet and generate excess free cash flow over the next three years. The stock also pays a sizable 5.4% dividend. Bank of America has a "buy" rating and $80 price target for OKE stock.


IBM is one of the world's largest information technology hardware, services and software solutions companies. IBM has been one of the biggest victims of a shift in the tech world from hardware to software and cloud solutions. But analyst Wamsi Mohan says the company's new CEO Arvind Krishna could be a meaningful catalyst for change at the technology giant. Mohan says IBM has the potential to transition to a sustainable growth story, and investors will be paid a 5% dividend for their patience. Bank of America has a "buy" rating and $170 price target for IBM stock.

Fifth Third Bancorp (FITB)

Fifth Third Bancorp is one of the largest U.S. regional banks, with more than $167 billion in assets. Banks are typically seen as one of the biggest victims of falling interest rates, which compress their net interest margins. However, analyst Erika Najarian says the recent rate cut will have minimal impact on Fifth Third's earnings, and the stock screens as one of the best values within the bank group. Fifth Third also has a solid balance sheet and pays a 4.5% dividend. Bank of America has a "buy" rating and $34 price target for FITB stock.

ViacomCBS (VIAC)

It's been three months since Viacom and CBS completed their merger to form ViacomCBS, and the marriage is off to a shaky start. The stock is down nearly 50% in that time, but analyst Jessica Reif Ehrlich says the sell-off is a buying opportunity. Reif Ehrlich says investors will need to be patient while the company restructures and integrates its assets. However, she says the stock's risk-reward balance is skewed to the upside, and the stock pays a sizable 4.5% dividend. Bank of America has a "buy" rating and $50 price target for VIAC stock.

Darden Restaurants (DRI)

Darden Restaurants is the parent company of Olive Garden and LongHorn Steakhouse. Analyst Gregory Francfort says Darden will be a market share winner in the casual dining space as a challenging environment weighs on competing restaurants. Francfort says Darden has been able to preserve margins and increase sales without relying on unprofitable delivery growth, which many peers have embraced. Francfort says a healthy U.S. consumer with disposable income is a tailwind for Darden, and the stock pays a 4.1% dividend. Bank of America has a "buy" rating and $130 price target for DRI stock.

Realty Income Corp. (O)

Realty Income is a REIT that owns nearly 6,000 free-standing commercial properties. The company's largest tenants include Walgreens Boots Alliance (WBA) and 7-Eleven. Analyst Spector says Realty Income's fourth-quarter earnings report and 2020 guidance were better than he expected. Fourth-quarter acquisitions were stronger than anticipated, setting the stage for a big 2020. Realty Income also guided for between $2.25 billion and $2.75 billion in 2020 acquisitions as the company aggressively expands into Europe. In addition, Realty Income pays a 3.7% dividend. Bank of America has a "buy" rating and $86 price target for O stock.

PNC Financial (PNC)

Najarian says higher charge-offs in the fourth quarter coupled with higher provisioning guidance has investors concerned about PNC Financial's risk levels. However, she says the troubling trends are due to PNC dipping its toes into the lower end of the auto credit and credit card markets about a year ago before shutting down the experiment six months later. Net charge-offs will likely remain elevated while the company works through these losses, but Najarian says PNC's overall credit remains "pristine." PNC pays a 3.9% dividend. Bank of America has a "buy" rating and $176 price target for PNC stock.

Stocks to buy in a low-rate environment:

-- Simon Property Group (SPG)

-- Oneok (OKE)

-- IBM (IBM)

-- Fifth Third Bancorp (FITB)

-- ViacomCBS (VIAC)

-- Darden Restaurants (DRI)

-- Realty Income (O)

-- PNC Financial (PNC)

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