The stock market is trading in bear market territory because investors are worried about the future. The market drop took both bad companies and good ones along for the volatile ride. But this offers an opportunity for investors willing to sort through the list of decliners to find those stocks that have been unfairly reduced in value.

Two stocks that should stand out as potential opportunities in October are high-yield dividend payers Simon Property Group (SPG -0.06%) and W.P. Carey (WPC -0.94%). Let's find out a bit more about these two stocks.

1. Simon Property Group: Down but not out

Simon Property Group is a real estate investment trust (REIT) with over 200 properties in its portfolio focused on malls and outlet centers. The properties are generally located in areas with material population density and high average incomes, which is exactly where retail tenants want to put their stores. The problem today is that recession fears caused investors to run scared from retailers and their landlords. While that makes some sense, it has to be couched into the bigger picture.

Traders on Wall Street looking at trading terminals with stock quotes in the background.

Image source: Getty Images.

Notably, Simon owns some of the highest-quality malls in the world. Its properties were hit pretty hard by the 2020 pandemic, which led to government-mandated shutdowns and an increase in retail bankruptcies. However, the REIT saw a strong business recovery, with occupancy up to 93.9% in the second quarter from 91.8% a year earlier. That's helped to drive a rebound in funds from operations and strong dividend growth (five hikes and counting), following a 2020 dividend cut. Simply put, Simon is in recovery mode.

But what about the future? Well, when the REIT signs a new lease, it actually takes some time to get the space ready to be occupied. And, at this point, Simon expects to see new tenants arriving throughout 2023 and into 2024 based on the leases it has already inked. This recovery isn't over yet, even though investors pushed the shares lower by over 33% so far in 2022. The dividend yield, meanwhile, is up to a very attractive 6.9%.

2. W.P. Carey: Built-in resilience 

W.P. Carey also saw its shares pummeled by investors, with the stock down around 20% from its highs earlier in the year. That's driven the dividend yield up to roughly 6%. Here's the thing, W.P. Carey is one of the most diversified net lease REITs you can find and it long prepared for the inflation that has investors so concerned about this niche of the real estate sector.

Net lease REITs own single-tenant properties for which the lessee is responsible for most of an asset's operating costs. Very often these properties are acquired in sale/leaseback transactions. It is a pretty boring approach in the REIT space, but one key piece of the puzzle is that properties are usually tied up in long leases. W.P. Carey's average lease length is over 10 years. Given the lease length, net lease REITs generally lock in regular rent hikes. The risk today is that inflation will outdistance the built-in rent escalators, which is a very real issue for many REITs.

W.P. Carey, however, shouldn't really be one of them. It has a long history of building inflation-linked increases into its leases. So, today, nearly 60% of its leases are keyed to rise along with inflation. To be fair, annual escalators will get tripped throughout the year, so this isn't a one-time fix. But W.P. Carey's portfolio will gradually be able to price in higher, inflation-linked rental rates as the year progresses and effectively protect its cash flows from the ravages of rising prices. Which makes the sell-off, perhaps, seem a little overdone.

Reasons to be less bearish

It's easy to get caught up in the negative mood when Wall Street starts to fall. However, if you can see past the sentiment and see the long-term fundamentals of a company, you can find good options with positive futures ahead of them. Simon and W.P. Carey look like just such companies, with both providing investors with generous dividend yields to help them stick around through the market downturn. Don't wait too long, however, because more investors will eventually figure out the deeper story.