The stock market has had a rough 2022 so far, and it hasn't just been growth stocks that are taking a hit. Even some excellent income-focused investments have been beaten down as well, despite having safe income streams and solid balance sheets.
With that in mind, here are two high-yield dividend stocks that are down by 15% and 33%, respectively, from recent highs that could be excellent sources of passive income for long-term investors.
1. The pandemic showed the resilience of experiences
EPR Properties (EPR +2.75%) is a real estate investment trust, or REIT, that specializes in experiential properties. It owns movie theaters, "eat and play" properties (TopGolf is one of EPR's largest tenants), ski resorts, waterparks, and more.
NYSE: EPR
Key Data Points
Obviously, EPR's properties were hit hard by the onset of the COVID-19 pandemic. For several months in 2020, virtually all of EPR's properties were closed, and the movie theater portion didn't fully reopen for a long time. At one point, EPR's rent collection dropped to just 15% of normal levels.
However, the pandemic has also shown just how resilient experiential properties are. People want to get out, get together, and have experiences. Rent collection has fully normalized, and EPR has once again stepped on the gas with growth, acquiring a couple of major properties already in 2022. The company pays a 6.8% annualized dividend yield in monthly installments, and the payout is well covered by its earnings.
To be fair, the concentration of movie theaters (41% of rent) is a bit of a concern, especially with Regal Entertainment's parent company expected to declare chapter 11 in the coming weeks. But the company owns higher-quality theaters and is actively diversifying away from the property type. With a $100 billion investable universe of real estate to pursue, there's no shortage of opportunities.
2. An advertising play that could be a big winner
Outfront Media (OUT +3.34%) is another REIT that was initially hit hard by the pandemic. The company owns and operates outdoor advertising properties and has two main segments. It is one of the largest owners of billboards in the U.S. and also has a massive transit system advertising business -- for example, if you've ever seen a banner ad in the New York City Subway, there's a good chance Outfront Media had something to do with it.
NYSE: OUT
Key Data Points
Clearly, there was little need for ad spending in mass transit systems when everyone was stuck at home. And with fewer businesses open, advertising spend on billboards declined as well. But the business has come roaring back. In the second quarter, Outfront's transit ad revenue increased by 79% year over year, and billboard ad revenue grew by 23%.
It's entirely possible that ad spending could slow down if the economy falls into a recession or if inflation persists. However, outdoor advertising is one of the most effective ways for businesses to get their message in front of potential customers and should have a bright future long-term. With a 6.1% dividend yield, Outfront should be a reliable source of passive income for years to come.
Two excellent long-term plays
I love both of these companies as long-term passive income plays. I own both in my retirement account and plan to use both as part of my eventual retirement income strategy. However, they aren't immune to short-term headwinds. For example, EPR has lots of tenant concentration risk, especially tied to the movie theater business -- as operators like AMC (AMC 7.32%) and Regal figure out how their businesses should look in the post-pandemic world, EPR could be a little turbulent. And in Outfront's case, advertising is inherently a cyclical business, and revenue could get hit hard if the U.S. falls into a deep recession. Long-term, both should perform quite well, but it's important to be prepared for short-term volatility.
