For more than two months, Wall Street and investors have been reminded that crashes and corrections are a normal part of the investing cycle. Although big drops in the market can be unnerving at times, they're the price of admission to one of the world's top long-term wealth creators.

But where there's volatility, there's almost always opportunity. With every notable stock market decline throughout history eventually getting erased by a bull market rally, this ongoing correction represents just another in a long line of opportunities for patient investors to put their money to work and grow their wealth.

The big question is: Which stocks to buy?

A person counting a stack of one hundred dollar bills in their hands.

Image source: Getty Images.

Buying dividend stocks is a winning formula for patient investors

While there are a lot of investing strategies that work over the long run, few have outperformed more resoundingly than buying dividend stocks.

Nine years ago, J.P. Morgan Asset Management, a division of money-center bank JPMorgan Chase, released a report that examined the annualized performance of dividend-paying stocks to non-dividend payers over a 40-year period (1972-2012). The report showed that dividend stocks absolutely mopped the floor with publicly traded companies that didn't pay a dividend. Specifically, companies that initiated and grew their payout delivered a 9.5% annualized return, which was many multiples higher than the 1.6% annualized return from the public companies not paying a dividend.

This outperformance isn't unexpected. Since income stocks are almost always profitable and time-tested, and have relatively transparent long-term growth outlooks, investors should expect these steady companies to increase in value over time.

Perhaps the biggest challenge for income investors is balancing yield and risk. Ideally, you'd want the highest yield possible with the least amount of risk. But data has shown that yield and risk tend to go hand in hand once you reach high-yield status (4% and above). Because yield is simply a function of payout relative to share price, a falling share price that's indicative of a struggling or failing operating model can lure income seekers into a value trap. What I'm ultimately trying to say is that high-yield and ultra-high-yield stocks (those I'm arbitrarily defining as having yields of 7% or higher) require extra vetting.

The good news for investors is that there are high-quality, ultra-high-yield dividend stocks they can buy and count on. In fact, select analysts on Wall Street see abundant upside for two popular ultra-high-yield income stocks. If these one-year price targets prove accurate, this duo could offer as much as 72% upside.

Family of four on couch, each with their own wireless device.

Image source: Getty Images.

AT&T: Implied upside of 72% (8.71% yield)

Among ultra-high-yielding stocks, you'd struggle to find a company with more upside potential than telecom stock AT&T (T 1.27%) -- at least according to one analyst.

In January, Ivan Feinseth of Tigress Financial increased his firm's 12-month price target on AT&T to $41 from $36. If Feinseth's price target were to become reality, AT&T's shares would increase by a cool 72%. Feinseth's note accompanying his firms' price target increase points to AT&T's subscriber growth and upcoming spinoff of WarnerMedia (which I'll touch on in a moment) as reasons shares can head substantially higher. 

For AT&T investors (of which I'm one), there are two key catalysts on the immediate horizon.

First, there's the continued upgrade of wireless infrastructure to support 5G speeds. It's been roughly a decade since download speeds were meaningfully improved. The rollout of 5G should entice consumers and businesses to replace their wireless devices for years to come. Since AT&T's wireless segment generates its juiciest margins from data consumption, faster download speeds with 5G represent a healthy dose of organic growth for this stalwart telecom company.

The second catalyst is the aforementioned spinoff of content arm WarnerMedia, which will then be merged with Discovery (DISCA) (DISCK) to create a new media entity, WarnerMedia-Discovery. Current AT&T investors will have a stake in this new media company.

When merged, WarnerMedia-Discovery will offer a larger content library and should be able to reduce its annual expenses by more than $3 billion. Pro forma subscriber figures suggest the new company will have in the neighborhood of 94 million streaming customers.

For what remains of AT&T following the spinoff, the focus will turn to debt reduction. AT&T plans to slightly more than halve its dividend so it'll have even more cash to pay down its debt. Yet even with this upcoming dividend cut, AT&T will still sport a hearty yield of around 4.3%.

Betting on a 72% increase in its share price in 12 months seems a bit optimistic. However, unlocking value via the WarnerMedia spinoff is a smart move and suggests AT&T could move much higher over time.

Nurse talking to elderly client.

Image source: Getty Images.

Sabra Health Care REIT: Implied upside of 34% (8.93% yield)

A second ultra-high-yield dividend stock with substantial upside, according to one Wall Street analyst, is Sabra Health Care REIT (SBRA 0.65%).

Sabra, which is a real estate investment trust (REIT) that owns more than 400 healthcare facilities tied to skilled nursing and senior housing, is expected to rally to $18 a share over the next 12 months, based on the price target offered by Stifel analyst Stephen Manaker. Manaker's optimism is based on the expectation of healthy funds from operation growth in 2022 despite the challenges presented by the COVID-19 pandemic. If Manaker is right, Sabra's shares could jump 34%, which would be on top of its nearly 9% yield.

As you might imagine, Sabra Health Care was hit hard during the early stages of the pandemic. Since COVID-19 is particularly troublesome for the elderly, occupancy rates at skilled nursing and senior housing facilities fell. This put into question whether Sabra would receive rent from its tenants on schedule.

But there's good news. According to the company, 99.6% of all expected rents have been collected since the pandemic began two years ago. What's more, senior occupancy rates in the skilled nursing and senior housing facilities it owns troughed over a year ago and have been rebounding ever since.

To add to the positives, the company recently amended its master lease agreement with Avamere, an operator of 27 facilities leased from Sabra. Avamere is the one key operator that had previously struggled to meet its rent payments. This amended master lease agreement gives Avamere some breathing room as it recovers from the worst of the pandemic, and it allows Sabra to potentially net more in future rent if Avamere's recovery really gains steam. In other words, a big gray cloud of uncertainty has been removed.

Although the pandemic isn't over, investors can begin looking into the future and marveling at Sabra's prime position in the healthcare space. As the boomer population ages, it'll be one of a handful of companies in ideal position to benefit.

With the company putting $419.4 million to work in the form of new investments in 2021, and netting a 7.6% weighted-average yield on those investments, it's a good bet to deliver steady returns for patient shareholders.