Why WP Carey is a dividend investor’s dream
There is no perfect stock, but WP Carey (NYSE: WPC) is one of those companies that has a proven track record in good times and bad. If you are a dividend investor looking for a long term stake, you need to dive into this Real Estate Investment Trust (REIT). Here are a few reasons why this owner could help make your dividend dreams come true.
1. A simple business
WP Carey is a confidence in real estate investment, but it invests specifically in net rental assets. This is a unique niche of the real estate market in which a REIT owns properties, but its tenants are responsible for most of the maintenance costs. Lease terms tend to be long, and automatic rent increases are usually built into agreements. It’s generally seen as a low-risk approach in the wider REIT industry, with WP Carey distinguishing between its cost of capital and the rents it charges.
While this might sound like a bad deal for a tenant, it really isn’t. When WP Carey buys a property, it is essentially providing the seller with access to capital. The new tenant can continue to use what is usually a vital property – and because the tenant pays for the upkeep, the property remains in pristine condition. It really is a win / win transaction.
2. Proven and tested
The coronavirus pandemic is a prime example of the quality of WP Carey’s execution. While some of his peers struggled to collect rents in 2020, WP Carey’s worst monthly collection rate was 96% in May. It’s barely a blip, which means he has collected almost all of his rents despite a global health alert.
But that’s not the only ordeal WP Carey overcame. A few years ago, the company envisioned splitting into three parts: a US-focused REIT, an overseas-focused REIT (more details below), and an asset management company. In the end, the then board and CEO disagreed on this plan, and the CEO was kicked out. The final game plan turned out to be much less drastic, with WP Carey simply shutting down its asset management business. In other words, the company you see today is who the board thinks it should be – which is reassuring considering these are the people you vote for to protect your investment.
3. Diversification in addition to diversification
You know diversification is good for your wallet, right? Well, it can also be very good for the business of a company. This is especially true in the REIT arena, as what WP Carey owns is essentially a portfolio of properties. This lessor’s portfolio is spread over the industrial (25%), office (23%), warehouse (22%), retail (18%) and self-storage (5%) sectors, with a fairly large “other” category. »Rounding things up to 100%. But that’s not all: it also generates around 39% of its rents outside the United States, mainly in Europe, which also gives it geographic diversification. It’s probably one of the most diverse REITs you can buy. It also plays into management’s inclination to invest opportunistically, often when others are pulling out because the company can invest money in a wide variety of industries and geographies.
4. Return value to shareholders
Of course, you can’t talk about a dividend-paying dream stock without talking about dividends – and WP Carey shines here, too. For starters, its 6.1% dividend yield is more than three times what you would get from a S&P 500 Index currently, and significantly above the 3.9% return of the average REIT, using the Vanguard Real Estate Index ETF as an agent. Even more enticing, the REIT has increased its dividend every year since its initial public offering in 1998, approximately 24 years. One more year and the REIT will be in the Dividend Aristocrat space out.
Clearly, WP Carey understands the importance of dividends to its shareholders – after all, it has increased its payout quarterly throughout the coronavirus pandemic. To be fair, the increases were small, but they were made as a statement, showing investors that WP Carey had not gone astray.
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If you are a dividend investor Looking to add a new name to your portfolio, WP Carey should be at the top of your wishlist. With a simple and proven business model, a diverse portfolio, and a long history of returning shareholder value through dividends, this is the kind of REIT that will give you a good night’s sleep.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.