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Now might be a good time to start buying high-yield dividend stocks, according to BMO Capital Markets. The S&P 500 stocks that pay the highest dividends have significantly underperformed the index over the past year and a half, even as they have rallied in recent months, according to chief investment strategist Brian Belski. Higher interest rates over longer periods have weighed on the group as investors have found attractive yields in the bond market. Those yields are expected to start falling as the Federal Reserve begins cutting interest rates. According to CME’s FedWatch Tool, which tracks traders’ bets, the market is pricing in a 100% chance of a cut at the central bank’s September meeting. “The relationship between these stocks and interest rates has been misunderstood in recent years, and their significant underperformance may be an overreaction by investors,” Belski wrote in a July 30 note. “But with the Fed now likely to cut rates sooner than previously expected, the potential for longer-term yields to fall in response should provide some momentum, however.” BMO’s analysis of historical trends also shows that this type of underperformance is often followed by “impressive recoveries,” he added. On top of that, the severity of the underperformance seems out of step with the underlying fundamentals of the group, Belski noted. Here are some of the highly paid names on BMO’s buy list. Analysts rate the companies as outperform and they are in the top 25% of S&P 500 stocks by dividend yield. Two drugmakers are among those BMO believes will outperform. Pfizer, which has a 5.73% yield, is up about 2% for the year as of Tuesday’s close. The pharmaceutical giant’s second-quarter revenue and adjusted earnings beat expectations last week. The company, which has benefited from a cost-cutting program and stronger-than-expected sales of its Covid antiviral, also raised its full-year outlook. Pfizer is also developing a once-daily version of its weight-loss drug. In July, the company said it had seen “positive” data in an early-stage study and planned to conduct more early-stage trials in the second half of the year. Meanwhile, AbbVie’s stock, which has a 3.34% dividend yield, is up nearly 20% year to date. With Humira now facing generic competition, AbbVie has been looking to expand its product portfolio. Last week, the company completed its $8.7 billion acquisition of Cerevel Therapeutics, which has several drugs in the pipeline to treat neurological and psychiatric conditions. In February, AbbVie completed its $10 billion acquisition of ImmunoGen, which is developing a cancer drug. Among the utilities that made the list were American Electric Power and Southern Company. The former has a dividend yield of 3.58%, while the latter has a yield of 3.33%. Utilities have been one of the best-performing S&P 500 sectors this year, thanks to expected demand for electricity to power artificial intelligence data centers. The sector is up about 16% year to date. Meanwhile, shares of American Electric Power are up 21% this year, while Southern is up more than 23%. Real estate, on the other hand, has been one of the worst-performing S&P sectors so far this year, up 4% compared to the S&P’s roughly 16% gain. BMO has been bullish on real estate investment trusts, believing the sector is poised for a turnaround. Two names on its list are Digital Realty Trust and Host Hotels & Resorts. Digital Realty Trust, which pays a 3.28% dividend, owns, develops, and operates data centers—which are expected to see a surge in demand thanks to AI. Last week, the company reported second-quarter core operating results that beat estimates, while its revenue missed expectations. The stock is up about 10% for the year so far. Host Hotels & Resorts, which owns luxury and upscale hotels, has a dividend yield of 4.92% and is down 16% so far this year. The company’s second-quarter operating results beat estimates last week, and its revenue was in line with expectations. However, the company lowered its full-year forecast for operating results and adjusted earnings before interest, taxes, depreciation, and amortization.