Investors may not be getting as many rate cuts as they had hoped in 2025, but there are still plenty of solid tailwinds for dividend-paying stocks. The Federal Reserve last week penciled in two interest rate cuts in the new year, fewer than the four reductions policymakers predicted back in September. A falling interest rate environment generally bodes well for dividend-paying stocks, as they have an easier time competing against the yields on risk-free Treasurys.
'In the construct of the Fed lowering rates, you see money market rates starting to come down as well,' Charles Gaffney, managing director at Morgan Stanley Investment Management and portfolio manager of the Eaton Vance Dividend Builder Fund (EIUTX) . Indeed, the Crane 100 Money Fund Index now has an annualized seven-day yield of 4.27%, compared to 5.13% at the end of July. There was $6.81 trillion in total money market fund assets as of the six-day period ending Dec. 24, according to the Investment Company Institute. Lower interest rates aren't the only 2025 development that could boost dividend payers. President-elect Donald Trump has called for slashing the corporate tax rate to 15% from its current 21%. Generally, lower tax rates would boost companies' cash flows, which in turn may spur dividends, buybacks and merger and acquisition activity, Gaffney added. A busy year for dividend payers Dividend-paying stocks tend to be sleepy companies whose days of huge growth are behind them, but 2024 proved different, as some of the world's largest tech players initiated dividend payments. Meta Platforms , Salesforce and Alphabet are among the tech giants to make their first dividend payments this year. The dollar amounts of these new dividends are small – for instance, Meta offers 50 cents per share, giving the stock a dividend yield of just 0.3% – but they offer long-term shareholders a combination of price appreciation and the prospect of dividend raise
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