W. P. Carey (NYSE: WPC) presents traders a big-time dividend. The diversified actual property funding belief (REIT) at the moment yields over 6%. At that charge, it could possibly flip a $1,000 funding into greater than $60 of annual dividend revenue. That is much more than you possibly can earn by investing that very same quantity in an S&P 500 index fund, given its decrease yield (1.3%).
The REIT’s passive revenue stream ought to rise steadily within the coming years. An enormous driver is its give attention to investing in high-quality business actual property that ought to provide it with a rising stream of rental revenue.
Constructed to generate steadily rising rental revenue
W. P. Carey owns a well-diversified portfolio of almost 1,300 high-quality, operational crucial properties (primarily warehouse, industrial, retail, and different actual property) secured by long-term web leases with credit-worthy tenants. It additionally operates 89 self-storage properties. The corporate’s web lease portfolio provides it with steady and rising rental revenue supported by built-in lease escalation clauses.
Greater than half of its portfolio hyperlinks rents to inflation, whereas most of the remaining of its properties function mounted contractual charge will increase. The corporate’s portfolio has been rising its same-store annual base lease at a 3% to 4% annual clip over the previous couple of years, due to elevated inflation. That gives the REIT with a pleasant base development charge.
Its steady and steadily rising rental revenue helps help its high-yielding dividend. W. P. Carey goals to pay out 70% to 75% of its adjusted funds from operations (FFO) in dividends annually. That is a really snug degree for a REIT. It provides the corporate a pleasant cushion whereas permitting it to retain money to fund new investments.
Constructing again higher
W. P. Carey’s different development driver is acquisitions. It is aiming to speculate $1.5 billion to $2 billion this yr. It has already secured about $700 million of latest investments in 2024. As well as, its funding pipeline options over $300 million of offers in superior phases. That places it nicely on its manner towards attaining its funding goal.
The corporate just lately closed or dedicated to speculate $258 million throughout a number of offers. It is shopping for a portfolio of 19 industrial properties in a two-part transaction for $190 million. It additionally just lately purchased three newly constructed distribution facilities for $40 million and two health facilities leased to an present tenant for $28 million.
It has ample monetary flexibility to proceed making new investments. Along with the money it retains after paying dividends and its sturdy stability sheet, W. P. Carey has an energetic capital recycling technique. It plans to promote $1.2 billion to $1.4 billion of properties this yr, together with finishing its phased exit from the workplace sector and promoting a portfolio of self-storage services again to the operator.
The corporate’s workplace exit has been a near-term headwind. Nevertheless, these asset gross sales give W. P. Carey the money to put money into properties with higher long-term development prospects. It primarily targets properties within the warehouse and industrial sector secured by long-term web leases that includes escalation clauses tied to inflation or which have a excessive mounted rental development charge.
W. P. Carey’s technique of promoting properties with decrease rental development potential or dealing with long-term demand headwinds will allow it to rebuild its portfolio with properties with extra long-term rental development upside. That ought to develop its money stream sooner sooner or later, driving a better dividend development charge.
A stable and rising revenue stream
W. P. Carey owns a high-quality portfolio of income-producing actual property. The rising rental revenue from its present properties and people it acquires ought to allow the REIT to develop its already high-yielding dividend at a stable charge sooner or later. These options make it an ideal possibility for traders looking for a sizable and steadily rising passive revenue stream.
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Matt DiLallo has positions in W. P. Carey. The Motley Idiot recommends W. P. Carey. The Motley Idiot has a disclosure coverage.
Received $1,000? This 6%-Yielding Dividend Inventory Can Flip It Into Extra Than $60 of Annual Passive Earnings. was initially revealed by The Motley Idiot
