After the stock market's declines over the past year or so, there is no shortage of high-yielding stocks. While the market was peaking in late 2021, it was difficult to find reliable dividends over 3%. Today, it's not at all uncommon to find high-quality businesses with yields in excess of 4%, 5%, or much more.
However, not all dividend stocks have excellent growth potential, but it's a combination of high yields and growth that creates market-beating total returns over time. With that in mind, here are two stocks in particular that not only have attractive dividend yields, but also have a ton of upside potential that could create exceptional long-term performance.
A few short-term headwinds, but a big opportunity
EPR Properties (EPR -0.10%) is a real estate investment trust (REIT) that specializes in experiential properties, meaning that it owns commercial properties leased to companies that sell experiences as opposed to physical products. These businesses are inherently not susceptible to e-commerce disruption, and EPR estimates a $100 billion addressable market of properties it could potentially go after. Think waterparks, ski resorts, gaming properties, cultural attractions, golf attractions (TopGolf is one of the largest tenants), and many more.
EPR has been beaten down in recent months because of its largest property type: movie theaters. In a nutshell, Regal Entertainment is one of EPR's major tenants and its parent company declared bankruptcy a few months ago. And there are (justifiable) investor fears about the future of the movie theater industry.
However, it's important to note that EPR owns the top-tier theater properties, so they are most likely to stay open, even through a bankruptcy restructuring. Regal has been paying rent on its EPR-owned theaters throughout the process, and with the recent box office success of films like Avatar 2: The Way of Water, it's clear that demand still exists. And while you're waiting for the uncertainty to play out, EPR has a well-covered 8.8% dividend yield that it pays in monthly installments.
One of the best dividend stocks in the market
Realty Income (O 0.24%) was actually the first real estate stock I ever bought years ago, and I have continually added to my position over time. Now one of my largest holdings, I'm confident that this fantastic income and growth stock still has plenty of great years ahead of it.
If you aren't familiar, Realty Income is a REIT that specializes in freestanding properties. Most are occupied by solid, recession-resistant retail tenants, and there are also industrial, agricultural, and gaming properties in the portfolio. Tenants sign long-term net leases that create steady, predictable, and growing cash flow.
Realty Income listed on the NYSE in 1994 and has delivered 14.4% annualized total returns since then, handily beating the S&P 500. And for income investors, the company has increased its monthly dividend for more than 100 consecutive quarters. At the current price, Realty Income yields about 4.6%, and with a multitrillion-dollar addressable market of properties, the company could continue to profitably grow for decades.
Buy for the long term
Both of these companies are solid, well-run businesses, but their stocks can be rather volatile over the short term. And that's especially true for EPR, which has significant short-term headwinds.
Having said that, I'm confident that investors who buy at these levels will likely enjoy market-beating total returns over time, and I've added both to my own portfolio for this exact reason.
