The S&P 500 remains in bear market territory, with the benchmark index down more than 20% so far in 2022, and few areas of the market have been spared. Even some of the most rock-solid dividend stocks have been beaten down, despite strong business performance and lots of long-term growth potential.
Here are three dividend stocks that are down by at least 35% from their recent highs and look like bargains for patient long-term investors.
Resilient retail with room to grow
Tanger Factory Outlet Centers (SKT 0.27%) owns and operates a portfolio of 36 outlet centers in the United States and Canada. Most are located in large metropolitan areas or tourism destinations in the eastern United States. In the downturn, Tanger has fallen about 35% from its highs and now yields 5.4%.
There are some legitimate concerns that a tough economy could lead to lower consumer spending and put pressure on Tanger's retail tenants. However, these fears appear to be overblown.
Tanger has a diversified tenant base made up of mostly high-quality national brands, and the discount-oriented nature of outlets makes them more resilient than most types of retail. What's more, while the stock market is down and economic uncertainty is rising, you would never know it from walking through one of Tanger's properties. In fact, Tanger's average tenant sales per square foot in the first quarter were 18% higher than they were before the pandemic started.
Iconic assets that should remain busy, even in a recession
Vail Resorts (MTN -0.27%) is the clear leader when it comes to ski resorts, operating dozens of the most well-known destinations in the world, including its namesake in Colorado. Fears of a decline in consumer spending and inflationary pressures have caused the stock to fall by more than 40% from its recent highs.
Vail's business has been performing quite well, thanks to an easing of COVID-19 restrictions during the recent ski season, compared to the year before. But more importantly, the company has reported very strong season-pass sales for the 2022/23 season. Passes make up nearly three-fourths of Vail's visits, and as of the latest earnings report, were 11% higher than at the same time a year ago.
Over the past decade, Vail has done an excellent job of building its brand and visitor monetization, and the stock has handily beaten the S&P 500, as a result. The recent decline is creating another opportunity for patient investors to buy this industry heavyweight.
This stock is down 40% but could benefit from rising rates
Bank of America (BAC -1.46%) has fallen nearly 40% from its recent high and for some good reasons. Consumer confidence recently hit a 10-year low, and this could translate to lower loan demand. Plus, with recession fears rising, it could lead to rising loan defaults for banks.
However, the downside seems to be mostly priced in after the stock's decline, and Bank of America could actually end up being a net beneficiary of the rising-rate environment. The job market in the U.S. is still incredibly strong, which should help keep loan performance at high levels.
The bank's loan and deposit portfolios continue to grow, and net charge-offs remain very low. Plus, management estimates that a 100 basis-point parallel shift in the yield curve could produce $5.4 billion annually in additional interest income.
Great total return potential for long-term investors
All three of these dividend stocks have the potential to produce excellent returns for long-term investors. They all have excellent dividend yields, as well as growth potential, and could earn market-beating total returns for patient investors who buy at these levels. However, they're all vulnerable to near-term volatility, so approach them with the long term in mind.