3 Dividend Kings to Buy if the Fed Starts Raising Rates: KO, PG, WMT

Consumer staples stocks could become increasingly attractive if stubborn inflation pushes the Federal Reserve, under new Chairman Kevin Warsh, toward renewed monetary tightening.

August's Consumer Price Index (CPI) rose 0.4% month over month and 3.4% annually, while core prices increased 0.3% monthly, coming in hotter than expected and strengthening the case for a potential Fed rate hike.

Higher interest rates typically cool consumer spending and economic growth, which can favor defensive businesses that sell everyday necessities.

In that environment, Coca-Cola (KO), Procter & Gamble PG), and Walmart WMT) stand out thanks to resilient demand, strong brands, and reliable dividends.

Adding to their defensive appeal, all three are Dividend Kings, with each having raised its dividend for more than 50 consecutive years.

Image Source: U.S. Bureau of Labor Statistics; chart created by ChatGPT

Coca-Cola's Pricing Power

Coca-Cola's vast beverage portfolio and enormous global distribution network give the company considerable pricing power, which can help offset inflationary increases in commodities, packaging, transportation, and labor costs.

More importantly, consumers tend to keep purchasing beverages regardless of economic conditions, making KO a defensive holding if higher rates slow discretionary spending.

Income investors also receive an annualized dividend of $2.12 per share, equating to a yield of roughly 2.4%. Coca-Cola raised its dividend for the 64th consecutive year in 2026.

Procter & Gamble's Defensive Appeal

Procter & Gamble may offer similar protection as Coca-Cola, with household staples such as Tide, Pampers, Crest, Gillette, and Charmin generating relatively consistent demand even during weaker economic periods.

P&G's powerful brands also provide pricing flexibility when input costs rise. Furthermore, PG currently offers an annualized dividend of $4.35 per share, yielding 3%, after increasing its dividend for an impressive 70th consecutive year.

Walmart Could Benefit From Consumer Trade-Down

Walmart offers a slightly different defensive thesis. Persistent inflation and higher borrowing costs can squeeze household budgets, potentially driving more consumers toward Walmart's value-oriented stores and grocery business.

This could allow Walmart to capture additional market share if consumers trade down from higher-priced retailers. WMT also provides an annual dividend of $0.99 per share, currently yielding near 1%, with 2026 marking its 53rd consecutive annual dividend increase.

Bottom Line

Renewed Fed tightening wouldn't automatically make these consumer staples stocks winners, as higher Treasury yields can also make dividend stocks relatively less attractive.

Still, KO, PG, and WMT could offer investors a compelling defensive combination of resilient demand, pricing power, dependable cash flow, and recurring dividend income if persistent inflation forces the Fed to raise rates and weighs more heavily on economically sensitive areas of the market.

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CocaCola Company (The) (KO): Free Stock Analysis Report

Procter & Gamble Company (The) (PG): Free Stock Analysis Report

Walmart Inc. (WMT): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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