Reliable passive income is great, but when you can get reliable passive income at a discount, it's even better. There are some excellent dividend stocks with rock-solid businesses that have been beaten down due to short-term headwinds. Here are three in particular that are worth a look right now.
1. EPR Properties
EPR Properties (EPR -0.03%) is a real estate investment trust, or REIT, that invests in experiential properties. Its portfolio contains eat-and-play businesses (Topgolf is a major tenant), ski resorts, waterparks, and most significantly, movie theaters.
EPR is actively trying to diversify its portfolio away from movie theaters, but for the time being, they represent about 40% of EPR's rental income. The top tenant is AMC Entertainment Holdings, followed by Regal, so it isn't surprising that the stock recently took a hit when Regal's parent company, Cineworld Group, announced it is considering bankruptcy.
However, this could end up not being a big deal for EPR. For one thing, lease liabilities are pretty high on the capital stack in bankruptcy -- essentially, Regal will still have to pay the rent it owes if it wants to keep operating its theaters after the reorganization. Plus, EPR's properties tend to be the higher-end and most successful movie theaters for their brands, so it's unlikely Regal would close its EPR-owned theaters. For patient income investors, EPR pays a 7.1% dividend yield in monthly installments, and the payout is well covered by the company's earnings.
2. Digital Realty Trust
Digital Realty Trust (DLR 0.12%) is one of the largest owners and operators of data centers. Think of a data center as a physical "home" of the internet. When you access a cloud-based application or upload photos to social media, all of that data needs to live somewhere.
There's quite a bit of pessimism surrounding data centers, especially since well-known short-seller Jim Chanos named data center REITs as his newest "big short" idea. But the reality is that data center demand has never been higher, and Digital Realty Trust has a fantastic track record of dividend increases and market-beating total shareholder returns. With a 3.8% yield and the stock nearly 30% off the highs, Digital Realty could be a bargain for income investors.
3. Outfront Media
Last but not least, Outfront Media (OUT -0.27%) has been beaten down recently, and for a valid reason. While the company is structured as a REIT, its business is selling advertising. Outfront Media is one of the market leaders in two different types of advertising: billboards and transit systems.
With many experts calling for a recession, Outfront's business could get hit in two different ways. For one thing, advertiser spending tends to decline as consumers spend less money and businesses pump the brakes on expenses. And second, Outfront Media sells advertising that only works if people are getting out and about. For example, if fewer people are driving down a highway because they aren't going out and spending money as much, billboard advertisements become less attractive.
Having said all of that, out-of-home has been a fast-growing type of advertising for years (not including the pandemic disruption) and should have a very bright future in the digital age. For now, this is a beaten-down stock with solid fundamentals and a 6.3% dividend yield.
Buy for the long term
It's worth noting that all three of these could be rather volatile in the short term, as they all are facing headwinds at the present time. But all three are solid businesses and long-term investors who get in at these prices should be handsomely rewarded with excellent passive income and growth over the years.
