Dividend stocks are typically not known for their potential for rapid gains, but it's not out of the question. In fact, there are many excellent and rock-solid dividend-paying companies whose stocks are up more than 100% over the past year.
There are some interesting dividend investing opportunities in the market right now. Not only are these three dividend stocks well-run businesses that should deliver excellent income and growth for decades to come, but they all could also be big winners as the COVID-19 pandemic (hopefully) comes to a gradual end over the next year or so.
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A reopening stock with a massive growth opportunity
EPR Properties (EPR 5.57%) isn't exactly a household name, but it could be one of the biggest winners of the normalization of life in the United States.
EPR is a real estate investment trust, or REIT, that specializes in experiential properties. Its biggest drawback throughout the COVID-19 pandemic has been the company's heavy concentration of movie theater properties, which make up just under half of EPR's contractual rent.
For one thing, the stellar rise in AMC Entertainment's (AMC 3.67%) stock has allowed that company, EPR's largest tenant, to raise billions in fresh capital and essentially take any bankruptcy risk off the table. Second, the company sees a $100 billion investable market of properties to diversify its portfolio away from theaters and has more than $1.5 billion in liquidity to get started with the best opportunities. If the pandemic figures start to trend in the right direction and EPR can successfully return to growth mode, it could be a strong couple of years ahead for the stock.
If interest rates rise, this stock could be a big winner
Wells Fargo (WFC +1.61%) has rebounded sharply since the depths of the COVID-19 crash, but it's still more than 20% below its pre-pandemic high. The bank's new leadership team is doing an excellent job so far of turning things around, and there are a couple of major catalysts that could fuel significant upside in the next few years.
For one thing, the Federal Reserve penalty that restricts the bank's growth is still in place. If you aren't familiar, because of the infamous fake-accounts scandal and other bad behavior, Wells Fargo is not allowed to grow its assets right now. The penalty is likely to be lifted within the next year or two, and it could be a big upside catalyst for the bank.
In addition, Wells Fargo could be a big winner if interest rates start to rise. As the most consumer-focused of the large U.S. banks, the company is well positioned to see its profit margin rise if consumer lending rates start to come off their historic lows.
As NYC uncertainty fades, this stock could soar
The COVID-19 pandemic has been especially harsh on Empire State Realty Trust (ESRT 1.55%) and it isn't hard to see why. The REIT owns the Empire State Building and a portfolio of other, mostly office, properties in the New York City area, and many companies still haven't brought their employees back to the office yet.
In addition, a substantial portion of Empire State's pre-pandemic income was derived from the observatory on top of its namesake property. Not only was the observatory closed for several months in 2020, but when it reopened, visitor traffic was a small fraction of pre-pandemic levels, and it remains that way.
The stock has pulled back significantly in the past couple months because of the delta variant surge and the renewed uncertainty surrounding office work and New York City tourism. If the pandemic turns a corner and ultimately comes to an end in 2022, there's a legitimate chance that Empire State Realty Trust could double.
Don't buy with the expectation of a double
To be clear, while I think all three of these dividend stocks are great businesses and I own them in my personal stock portfolio -- Empire State is actually my largest investment -- there's a lot that would need to go right for any of these three stocks to double within a year or two. It's certainly possible, but that's not why I own them. I own these because they are excellent, well-run businesses that should produce an excellent combination of growth and income over the long term. They just seem like especially compelling opportunities right now.
