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Written by Daniel Da Costa<\/a> at The Motley Fool Canada<\/p>\n When it comes to investing, interest rates are always at the top of investors\u2019 minds, and for good reason. They have a massive impact on how stocks, especially ones that pay dividends, are valued, in addition to how the broader economy behaves.<\/p>\n In recent years, interest rates have dominated almost every economic conversation. They were forced higher to control the surge in inflation, stayed front and centre as rising living costs collided with higher borrowing expenses, and now remain in the spotlight as investors wait for long-anticipated cuts.<\/p>\n The problem is that they can also be confusing for some investors. When rates rise, certain sectors stumble. When rates fall, others take off. So, in order to make sense of which dividend stocks can hold up through rate cuts, it helps to understand the basic mechanics.<\/p>\n Essentially, central banks increase interest rates to pull money out of the economy, such as during periods of surging inflation. By increasing interest rates, borrowing becomes more expensive, yields on stocks and bonds rise, and stock valuations generally decline. Furthermore, companies with meaningful debt loads also face shrinking margins because their interest expenses climb.<\/p>\n On the flip side, when interest rates are lowered, borrowing becomes cheaper, so economic activity tends to pick up, and the discount rate used to value future cash flows<\/a> drops.<\/p>\n That combination typically pushes stock prices higher, especially for companies that rely on steady cash flows or carry large amounts of debt. In fact, lower interest rates pushing valuations higher is one of the major reasons the market has performed so well this year.<\/p>\n So, the good news for investors is that most Canadian dividend stocks actually benefit when interest rates start moving lower.<\/p>\n With that said, though, not every industry experiences rate cuts the same way. One area that sees more of a mixed impact is the financial sector.<\/p>\n Although interest rate decreases help improve the valuation of all stocks because of the lower discount rate used to value future cash flows, companies in the financial sector can see mixed impacts from lower interest rates.<\/p>\n Banks, for example, can face pressure on net-interest margins<\/a> as lending rates adjust downward faster than deposit costs. With that being said, though, lower interest rates also reduce the frequency of loans underperforming, so even bank stocks can see their operations positively impacted by falling interest rates.<\/p>\n Meanwhile, insurance companies can also experience slight headwinds as a result of lower interest rates since they tend to earn less on the fixed-income portfolios that support their long-term liabilities.<\/p>\n The majority of stocks, though, will benefit from lower interest rates, whether it\u2019s due to valuations across the board increasing, less interest expense impacting profit margins, or more money in the economy being used to consume goods.<\/p>\n That\u2019s why right now is one of the best times for investors to buy high-quality Canadian stocks, especially ones that are trading below fair value.<\/p>\n For example, many stocks in the real estate sector continue to trade ultra-cheaply as a result of the impact higher interest rates have had on their operations.<\/p>\n Killam Apartment REIT (TSX:KMP.UN<\/a>), a $2 billion<\/a> residential REIT, is a perfect example. Not only is the stock trading at a forward price-to-funds-from-operations (P\/FFO) ratio of 13.2 times, which is considerably cheap for a residential REIT. But that\u2019s also well below its five-year average forward P\/FFO ratio of 16.1 times. Furthermore, its current forward dividend yield<\/a> of 4.4% is also considerably higher than its five-year average forward yield of 3.9%.<\/p>\n Plus, in addition to Killam, a residential REIT that\u2019s even cheaper is Minto REIT (TSX:MI.UN<\/a>), a roughly $500 million company with properties in major cities all across Canada.<\/p>\n Minto is currently trading at a forward P\/FFO ratio of 13.8 times, which may seem higher than Killam on the surface. However, its five-year average forward P\/FFO ratio is upwards of 20 times, showing just how cheaply Minto is trading today.<\/p>\n So, if you\u2019re looking for high-quality stocks trading cheaply, I\u2019d consider these top dividend stocks soon before interest rates continue to decline.<\/p>\n The post Which Dividend Stocks in Canada Can Survive Rate Cuts?<\/a> appeared first on The Motley Fool Canada<\/a>.<\/p>\n Before you buy stock in Killam Apartment REIT, consider this:<\/p>\n The Motley Fool Stock Advisor Canada analyst team identified what they believe are the 15 best stocks for investors to buy now\u2026 and Killam Apartment REIT wasn\u2019t one of them. The 15 stocks that made the cut could potentially produce monster returns in the coming years.<\/p>\n Consider MercadoLibre, which we first recommended on January 8, 2014 \u2026 if you invested $1,000 in the \u201ceBay of Latin America\u201d at the time of our recommendation, you\u2019d have $22,894.52!*<\/p>\n Now, it\u2019s worth noting Stock Advisor Canada\u2019s total average return is 105%* \u2013 a market-crushing outperformance compared to 71%* for the S&P\/TSX Composite Index. Don\u2019t miss out on our top 15 list, available when you join Stock Advisor Canada.<\/p>\n See the 15 stocks <\/a><\/p>\n * Returns as of October 30th, 2025<\/p>\n More reading<\/p>\n