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W.P. Carey’s diversified portfolio produces very stable and steadily rising rental income.
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The REIT’s conservative financial profile enables it to grow its portfolio.
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Those growth drivers should enable the REIT to continue increasing its dividend.
I desire to become financially independent. My investment strategy is straightforward: I aim to build reliable sources of passive income that can eventually cover my basic living expenses. To execute this plan, I regularly invest in income-generating assets, such as high-yielding dividend-paying stocks.
This approach recently led me to purchase more shares of W.P. Carey (NYSE: WPC), a company I strongly believe aligns with my passive income goals. Here’s why W.P. Carey is integral to my dividend income strategy.
W.P. Carey is a real estate investment trust (REIT). It owns a well-diversified portfolio of high-quality operationally critical commercial real estate across North America and Europe. The company primarily invests in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases with built-in rent escalations. Those net leases provide the landlord with very stable rental income because tenants cover all property operating costs. Meanwhile, the built-in escalations either raise rents at a fixed rate or one tied to inflation, providing it with steadily rising income.
The REIT expects to produce between $4.87 and $4.95 per share of adjusted funds from operations (FFO) this year. That’s more than enough to cover its dividend, which is currently up to $3.64 per share each year. With its stock price recently below $70 a share, W.P. Carey has a 5.2% dividend yield. I can generate $5.20 of annual dividend income for every $100 I invest in the REIT at that rate.
W.P. Carey’s stable cash flow and conservative payout ratio put its high-yielding dividend on a rock-solid foundation.
W.P. Carey stands out from other net-lease REITs due to its focus on investing in properties with built-in rental escalation clauses that primarily link rents to inflation (50% of its leases). Elevated inflation levels in recent years have helped drive faster rent growth. W.P. Carey’s same-store annual base rents have grown at a 2% to 4% annual rate over the past few years. That provides a nice base growth rate to support dividend increases.
Acquisitions are the REIT’s other main growth driver. W.P. Carey uses a combination of post-dividend free cash flow, new debt, equity issuances, and non-core asset sales to fund new investments. The REIT currently expects to invest between $1.4 billion and $1.8 billion this year. It had already secured $1.3 billion of new investments through early September, primarily single-tenant industrial properties in North America. These properties are currently the most attractive new investments it can make due to their combination of cap rates, lease terms, and rental escalations.
