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3 Dirt Cheap Dividend Stocks to Buy and Hold for at Least a Decade

Motley Fool - Sat Jun 25, 5:32AM CDT

The market has been turbulent recently, and many stocks have fallen dramatically from their highs. And while growth stocks have generally been the hardest hit, high-quality dividend stocks haven't exactly been spared.

However, this means that there are some excellent opportunities to add shares of rock-solid dividend stocks to your long-term investment portfolio at a discount. Here are three dividend-paying stocks in particular that could be worth a closer look in the current market environment.

A tremendous value with lots to gain

Bank stocks have taken a beating recently, and Bank of America(NYSE: BAC) is no exception, with shares down by more than 35% from the highs. And to be fair, there are some good reasons: in recessions banks tend to see loan default rates rise, and the recent decline in consumer confidence could lead to lower loan volume in the near term.

However, it's also important to realize that banks have much to gain from a rising-rate environment, and with a high level of noninterest-bearing deposits (read: free money), Bank of America is in a better position than most. In fact, Bank of America has estimated that a 100-basis-point (1%) shift in the yield curve would produce $5.4 billion in additional net interest income annually. In a nutshell, the bad news seems to be priced into the stock at this point, but the potential benefits of the current environment seem to be overlooked.

A different kind of tech stock

Digital Realty Trust(NYSE: DLR) is a real estate investment trust (REIT) that specializes in data center properties. If you aren't familiar, think of data centers as the physical "homes" of the internet. Whenever you access a cloud-based software program, upload a video to social media, or check your email, all of that data has to physically live somewhere. Data centers provide a reliable and secure environment for companies to house servers and other networking equipment.

With a portfolio of over 290 data centers located around the world, Digital Realty is one of the largest real estate owners of any type in the world. And although growth has been extremely impressive so far (2,220% total return since its 2004 IPO), the volume and sophistication of data flowing around the world is still growing rapidly, with no signs of slowing down. In fact, the global rollout of 5G technology and the adoption of things like augmented reality, autonomous vehicles, and more will only add to it. With the stock about 25% below its recent high and a stable 3.6% dividend yield, this could be a great opportunity to take a closer look.

Getting back to growth mode

To be sure, EPR Properties(NYSE: EPR) has actually outperformed the market recently with a decline of "just" 19% from the highs, but the stock still looks very cheap. The experiential real estate company, which owns properties such as movie theaters, waterparks, golf attractions, and ski resorts, has a rock-solid balance sheet and is trading for just over 10 times expected 2022 funds from operations (FFO).

Plus, after a couple of years of wisely pumping the brakes on growth, EPR is ready and able to pursue attractive opportunities. The company sees a $100 billion addressable market of investment properties in its wheelhouse and ended the first quarter with over $300 million in cash and an untapped $1 billion credit line. In fact, EPR just announced its first major acquisition in several years, a $142 million purchase of a resort and a waterpark in Canada. With a solid income stream and a 7% dividend yield paid in monthly installments, this one is looking too cheap to pass up.

Only if you measure returns in decades...

I own all three of these in my personal stock portfolio, and to be perfectly clear, I have no idea what they're going to do over the next few weeks or months. If interest rates spike higher faster than expected, or a recession hits the economy harder than experts are calling for, they could be rather volatile in the near term. However, these are three well-run businesses, and I'm quite confident investors who buy them now will be happy they did in the long run -- in fact, I own all three in my retirement account and have no plans to sell.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® has positions in Bank of America, Digital Realty Trust, and EPR Properties. The Motley Fool has positions in and recommends Digital Realty Trust. The Motley Fool recommends EPR Properties. The Motley Fool has a disclosure policy.

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