An Important Warning For Dividend Investors After Donald Trump’s Victory

• Donald Trump’s victory has had a pronounced impact on market behavior, anticipating meaningful policy changes once he takes office.
• We analyze the likely impact of his policy proposals on dividend stocks.
• We share which sectors we think are particularly opportunistic right now and where we are allocating capital as a result.

Donald Trump’s decisive victory over Kamala Harris in the recent U.S. Presidential election has significantly impacted the markets. Bitcoin (BTC-USD has soared to all-time highs, and tech stocks like Tesla (TSLA have boomed in response to the victory. Meanwhile, precious metals (GLD , (SLV have lagged, and the rest of the market has experienced mixed results.

One key takeaway that could impact the high-dividend space is the Federal Reserve’s apparent intention to continue its rate-cutting regime, albeit at a slower pace than previously anticipated. This slower pace reflects a more bullish economic outlook under Trump’s policies, which are expected to positively impact U.S. economic activity. Additionally, Trump’s policies may cause a short-term spike in inflation.

This article discusses these developments in greater detail and highlights specific high-yield stocks and segments that are most opportunistic under a second Trump administration.

Assessing The Potential Impact Of Trump’s Policy Proposals

One of Trump’s most potentially impactful policies on dividend stocks is his push to impose tariffs on imports, especially massive tariffs on Chinese goods. While the implementation and extent of these tariffs remain uncertain, their likelihood has increased significantly after Trump’s victory, especially with Republican control of both houses of Congress. Tariffs would likely cause a short-term rise in inflation as supply chains adjust, and imports—especially from China—become pricier. While Chinese companies or the Chinese government might attempt to subsidize prices, it is unlikely they could absorb the full impact of Trump’s proposed tariffs. Walmart (WMT and Lowe’s (LOW both recently cautioned about the inflationary effect of tariffs, as did UBS (UBS . Trump’s desire for mass deportations of illegal immigrants could also be inflationary as many illegal immigrants work at lower wages than typical U.S. workers, and their removal would reduce labor supply and drive up wage costs.

However, Trump’s other policies—including extending and deepening corporate and individual tax cuts—could offset some inflationary pressures from Tariffs. This is because—by reducing income taxes on both corporations and individuals—workers would need less gross pay to maintain their take-home pay, and companies could maintain profit margins while charging lower prices. Trump’s pro-energy production policies could also have a significant deflationary effect, as energy expenses impact the cost of production of the vast majority of goods and services. His emphasis on reregulation could further lower costs, and potential steep spending cuts and mass layoffs in government agencies under the proposed Department of Government Efficiency could also provide a deflationary impact on the economy.

Given these dynamics, we expect the Federal Reserve to continue cutting rates, but at a slower pace than previously anticipated. Moreover, a near-term spike in inflation may occur if tariffs are implemented or mass deportations take place since Trump’s deflationary policies—such as tax cuts, increased energy production, deregulation, and reduced government spending—will likely take time to have an effect on consumer prices. Over the long term, however, especially if meaningful government spending cuts are achieved, we anticipate lower long-term interest rates, even if short-term rates decline more gradually.

Our Top Picks

Given the implications of Trump’s victory, we are more bullish on business development companies, or BDCs (BIZD , than before, as short-term interest rates are unlikely to fall rapidly and instead will likely decline more gradually. This stability gives BDCs time to adjust their portfolios and balance sheets to support base dividends. Additionally, a stronger economic outlook reduces the risk of a sharp rise in non-accruals. As a result, we have recently added some BDCs to our Core and Retirement Portfolios.

Midstream infrastructure, particularly master limited partnerships (MLPs) (AMLP , appears especially well-positioned. Trump’s pro-energy policies should benefit midstream companies, as they are largely price-agnostic and could see increased growth opportunities from higher energy production. Midstream infrastructure is also poised to benefit from surging energy demand, driven by the AI boom and robust economic activity. As Western Midstream’s (WES CEO recently stated:

This new administration is very likely to be more friendly to oil and gas in general. I think it’s a widely held view that the midstream space should be one of the primary beneficiaries of that.

As a result, we remain as bullish as ever on the sector, and have overweight positions in MLPs like Enterprise Products Partners (EPD and several others in our Core and Retirement portfolios.

Defensive business models with inflation protection also remain attractive, given the uncertainty surrounding which of Trump’s policies will actually be enacted. In particular, stocks like W.P. Carey (WPC , Brookfield Infrastructure Partners (BIP , (BIPC , and Brookfield Renewable Partners (BEP , (BEPC are excellent choices. These companies boast strong balance sheets, well-covered dividends, and proven resilience in recessions. Moreover, their inflation-linked contracts ensure rising revenues if inflation picks up, while their robust financial positions enable them to thrive in higher interest rate environments. Should rates fall alongside inflation, these companies’ long-duration cash flows would increase in value, further boosting returns.

Investor Takeaway

While uncertainty lingers about how exactly Trump’s policy proposals will unfold, we think that maintaining a diversified high-yield portfolio that combines BDCs, which benefit from economic stability and slower rate cuts, with midstream infrastructure companies that thrive under pro-energy policies and AI-driven demand, provides strong risk-adjusted income and total return potential given the likely range of policy outcomes in a second Trump administration. Additionally, attractively priced all-weather businesses like WPC, BIP, and BEP offer resilience and upside potential across various economic scenarios. These include the reshoring of U.S. industrial activity, which should be a boost to WPC’s industrial warehouse focus and BIP’s and BEP’s AI-related infrastructure focus.