This Stock Will Benefit From Higher Interest Rates -- and It Just Raised Its Dividend
Members of the Federal Reserve are widely expected to raise the agency's benchmark overnight lending rate (the federal funds rate) at their upcoming March meeting, leaving behind the ultra-low-rate environment that has persisted since the start of the pandemic in 2020. And the Fed may proceed to raise the federal funds rate several times this year. While much uncertainty remains in the market, many banks are expected to benefit from rising interest rates.
One I like in particular, though, is Eastern Bankshares (NASDAQ: EBC), a $23.5 billion asset bank in Boston that went public in 2020. Here's why.
The reason banks benefit from interest rates is because most of them are asset sensitive, meaning the yields on more of their loans reprice higher with the federal funds rate than the yields on their deposits and other funding sources. If loan yields are rising and deposit yields are staying stable or rising much less, banks can widen their margins and make more money.
Source Fool.com
