Later this year, the Federal Reserve is projected to begin reducing interest rates. While the exact number of rate cuts is still uncertain, this regulatory action is expected to stimulate a surge in high-yield dividend stocks, primarily because fund managers tend to aggressively purchase high-yield dividend stocks in low-rate environments. That leads these stocks to typically outperform the major benchmark indices when interest rates start to decline.

Which high-yield dividend stocks are best positioned to capitalize on this historical trend? Telecom giant AT (NYSE: T) and drug manufacturer (NYSE: PFE) appear to be deeply undervalued at their current levels. Furthermore, each stock offers a yield of over 6%, which should draw significant attention from fund managers once interest rates start to fall. Here's a brief overview of the advantages and disadvantages associated with each stock.

Image Source: Getty Images.

Continue reading

Source Fool.com