Market Commentary: 1 REIT You Don’t Want to Miss

Some REITs focus on warehousing, some on industrial properties, some on retail, and still others on fitness centers, and then there is WP Carey that diversifies its revenues across a wide variety of property types to ensure that it is not unduly exposed to any particular sector.

That formula of limiting risk isn’t limited to property types but expands to geographies too. Under its property umbrella, WP Carey has an array of buildings across the United States and beyond to Europe, too.

And these aren’t just any properties but ones that investors can generally bank on with investment grade tenants that are locked into triple-net lease agreements.

In spite of its attractive business model and growing sales rapidly over the past year, the share price has taken a tumble, underperforming the S&P 500 by 44% year-to-date.

That’s the kind of track record that will make some investors want to sit on the sidelines but it’s also the type of share price performance that is so bad, it can mean a stock is on sale, is that the case here?

Key Points

• WP Carey diversifies its investments across various sectors and properties are leased to investment-grade tenants under triple-net agreements, ensuring a stable income stream.
• Despite a robust business model and growing sales, WP Carey’s share price has underperformed the S&P 500 by 44% year-to-date, potentially signaling a buying opportunity.
• The REIT offers a high dividend yield (7.6%) and has a track record of dividend growth. 

Why Buy WP Carey?

While the share price of WP Carey would make most investors want to run in the opposite direction, there is in fact much to like about the firm right now.

The first eye-catching statistic is the yield which is around 7.6%, almost 50% higher than the much vaunted payout on short-term bills now. Better yet, the Board of Directors has been hiking the dividend for over a decade now, each and every year. Clearly, they have income-focused shareholders’ interests in mind by so doing.

And then there are the financials, which are stellar. In addition to last twelve months sales up by 22.1% year-over-year following a gain of 22.5% the prior period and 17.9% the one before that, sales are forecast to grow again this year according to analysts. So too are earnings and cash flows trending very much in the right direction.

Best of all, the valuation suggests that there is more to go, albeit not a jaw-dropping gain. Analysts estimate that the share price could climb towards $60 per share before hitting their intrinsic value.

Though it’s a modest enough gain, the combination of share price upside in conjunction with a sky high dividend yield makes WP Carey an attractive play at this time.

Will Macro Forces Hurt WP Carey?

No doubt, the persistently high interest rates will act as a headwind for any REIT but WP Carey has a great record of navigating through economic turbulence and a large part of that is attributable to its focus on quality.

Whether it’s offloading poor-performing assets, snapping up high quality properties, or locking tenants into rent hikes and triple-net lease agreements, WP Carey has demonstrated its ability to generate stable revenues and earnings through thick and thin.

Certainly, it is susceptible to the same downturns that are affecting real estate investment trusts more generally but don’t be surprised to find in a few years that WP Carey has shined brighter than its peers and paid loyal shareholders a very handsome yield in the interim.