These stocks could benefit from interest rate cuts in 2025

The U.S. Federal Reserve began cutting key interest rates in September 2024 after a long series of increases that began in early 2022 to tame rising U.S. inflation. So far, rate cuts have been made at three consecutive meetings. The pace of rate cuts is expected to slow in 2025, but the downward trend is expected to continue.

In an environment of falling interest rates, some stocks may see significant upside. Let's look at two companies that could benefit from this situation, and rates are not the only factor that could lift them in 2025.

Realty Income $O: A monthly dividend company

In a time of falling interest rates, demand for stocks in the real estate sector is increasing. This is because lower short-term rates are typically associated with lower mortgage rates. Shares of Realty Income rose from a low of around $50 to nearly $65 in 2024, but then fell as the yield on the 10-year Treasury note rose to 4.8%.

Still, Realty Income has a lot to offer. The company provides dividends monthly, not quarterly, offering investors a steady income. At a share price of around $53, the annual dividend yield is about 6%. Moreover, management has been raising the dividend continuously for 30 years with an average annual growth rate of 4.3%.

Realty Income has also demonstrated the ability to grow in a variety of economic environments. Since 1996, it has experienced annual growth in adjusted working capital of 5%, which, along with the dividend yield, has produced an average annual total return of 11%. The company continues to diversify its portfolio through acquisitions, such as the $9.3 billion takeover of Spirit Realty Capital in 2024, and expanding its European and data center operations.

Kinder Morgan: Leader in energy transportation

Another strong dividend company is pipeline operator Kinder Morgan $KMI. This company has already seen its stock rise more than 55% last year. With natural gas demand expected to grow and interest rates falling, Kinder Morgan has a promising future.

Kinder Morgan owns or manages 67,000 miles of pipelines, making it the largest natural gas transportation network in North America. Approximately 40% of the gas consumed in the U.S. is transported through their infrastructure. Natural gas plays a key role in growing energy demands, particularly in powering data centers that support the development of artificial intelligence.

The company has invested nearly $500 million in the Gulf Coast Express pipeline expansion and expects long-term growth in natural gas demand, as confirmed by its chairman Richard Kinder. This trend is underpinned by the need to ensure a stable and uninterrupted supply of energy, which renewables cannot always provide.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source: aol.com