Rising Interest Rates Could Help This High-Yield Dividend Stock

With roughly $30 billion of debt, including almost $10 billion of floating-rate debt, Lumen Technologies (NYSE: LUMN) might seem like a bad investment in a period of rising interest rates. Investors certainly seem worried. Lumen stock has lost a quarter of its value over the past year. That has lifted this dividend stock's yield to a sky-high 9.6%.

Yet rising interest rates could actually aid Lumen's efforts to reduce its debt load following a pair of pending asset sales. That could pave the way for big share price gains as the telecom company's growth investments start to pay off in the next few years.

When the pandemic hit the U.S. in 2020, the Federal Reserve acted aggressively to support the economy. It cut short-term interest rates to near zero. The Fed also used bond purchases to push down long-term interest rates. As recently as last summer, short-term government debt yielded less than 0.1%, while even the 10-year Treasury had a minimal yield of around 1.3%.

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Source Fool.com