W. P. Carey (NYSE:WPC) offers investors a significant dividend. The diversified real estate investment trust (REIT) is currently yielding more than 6%. At this rate, it can turn a $1,000 investment in over $60 of annual dividend income. This is much more than you could earn by investing the same amount in a S&P500 index fund, given its lower return (1.3%).
THE REITs the passive income stream is expected to increase steadily in the coming years. One of its key drivers is a focus on investing in high-quality commercial real estate, which is expected to provide it with a growing stream of rental income.
Designed to generate constantly increasing rental income
WP Carey has a well-diversified portfolio of nearly 1,300 high-quality, critical operating properties (primarily warehouse, industrial, retail and other real estate) secured by long-term contracts. net leases with solvent tenants. It also operates 89 self-storage properties. The company’s net lease portfolio provides it with stable and growing rental income, supported by built-in rent escalation clauses.
More than half of It is wallet connections rents to inflation, while most rest of its buildings benefit from fixed contractual price increases. The company’s portfolio has increased its annual same-store base rent by 3-4% per year over the past few years, thanks to high inflation. This gives the FPI a nice person basic growth rate.
Its stable and constantly increasing rental income helps support its high-yielding dividend. WP Carey aims to pay out 70-75% of its adjusted operating funds (FFO) in dividends each year. This is a very comfortable level for a REIT. This gives the company a nice cushion while allowing it to retain cash to fund new investments.
Build Back Better
WP Carey’s other growth driver is acquisitions. Its goal is to invest between $1.5 billion and $2 billion this year. It has already secured approximately $700 million in new investments in 2024. Additionally, its investment portfolio includes more than $300 million in late-stage deals. This puts him on track to achieve his investment goal.
The company recently completed or committed to investing $258 million in several transactions. It is purchasing a portfolio of 19 industrial properties in a two-part transaction for $190 million. It also recently purchased three newly constructed distribution centers for $40 million and two fitness centers leased to an existing tenant for $28 million.
It has great financial flexibility to continue to make new investments. In addition to the cash it retains after paying dividends and its strong balance sheet, WP Carey has an asset capital recycling strategy. It plans to sell $1.2 billion to $1.4 billion worth of properties this year, including finalizing its phased exit from the office sector and selling a portfolio of self-storage facilities back to the operator.
The closure of the company’s offices was a short-term obstacle. However, these asset sales give WP Carey the liquidity to invest in properties with better long-term growth prospects. It mainly targets buildings in the warehouse and industrial sector guaranteed by long-term net leases with indexation clauses linked to inflation or with a high fixed rental growth rate.
WP Carey’s strategy of selling properties with lower rent growth potential or facing long-term demand headwinds will allow it to rebuild its portfolio with properties with higher rent growth potential. long term. This should increase its cash flow more quickly in the futureleading to a higher dividend growth rate.
A solid and growing source of income
WP Carey has a high quality, income generating real estate portfolio. Increasing rental income from its existing properties and those it acquires should allow the REIT to increase its already high-yielding dividend at a solid pace going forward. These characteristics make it a big option for investors looking for a considerable and a constantly growing stream of passive income.
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Matt DiLallo has positions within WP Carey. The Motley Fool recommends WP Carey. The Motley Fool has a disclosure policy.
Do you have $1,000? This 6% dividend stock can turn it into over $60 in annual passive income. was originally published by The Motley Fool
