Do you have $ 1,000? Here is 1 great stock to buy and keep
IDoes money burn a hole in your pocket as you try to find a good dividend stock in today’s market? It is not an easy task, with the S&P 500 index still rising near record highs (despite recent volatility). But there is a worthy name that has rewarded investors through thick and thin. In fact, it’s almost always a good time to add WP Carey (NYSE: WPC) to your wallet. Here’s why.
1. Consistency of dividends
It won’t surprise you, but 2020 has been a very difficult year for homeowners. However, WP Carey has weathered the turbulence associated with the pandemic. The worst thing for the Real Estate Investment Trust (REIT) was when it received 96% of the rent it was owed in May of last year. Today, she essentially collects all of her rents. Against this background, it shouldn’t be shocking to learn that the dividend has been increased in every quarter of 2020 and again in each of the first three quarters of 2021.
Image source: Getty Images.
But that’s just a small subset of a much longer streak. WP Carey has increased its dividend every year since its IPO in 1998. At this point, the payout has been increased for 24 years and three quarters, which puts it at just one quarter of 25 years in a row. In other words, he’s on the verge of becoming a dividend aristocrat – all that’s holding him back is one more dividend payout and the timeline moves to 2022.
The last 25 years or so include the dot-com implosion, the 2007-2009 financial crisis, and the 2020 pandemic. So WP Carey has clearly been successful in facing adversity while continuing to perform well. Today’s dividend yield, meanwhile, is an impressive 5.6%, higher than most of its closest peers and well above the 2.3% yield of the average REIT, using Vanguard Real Estate Index ETF as an agent. In other words, this REIT is a reliable high yield stock.
2. Opportunistic and active
One of the main reasons for WP Carey’s long term success is that management is always looking for ways to grow. The most recent example came in 2020 when, at the start of the pandemic, he announced that he was looking for industrial assets and warehouses to buy.
The reasoning was simple: Companies faced uncertainty and sought to raise cash to strengthen their balance sheets. And warehouses and industrial properties were likely to be huge beneficiaries of the ongoing transition to online shopping, a trend the pandemic has accelerated. This is the kind of thing you want the businesses you own to do.
But there is more to the story here, as WP Carey just happens to be one of the most diverse REITs you can find. The portfolio includes the industrial, warehouse, retail, office and self-storage sectors. And it has significant foreign exposure, most of which comes from its European assets. So the REIT really has the ability to put the money to work where it sees the best opportunities. Many of his peers focus on one or two niches.
It should also be noted that WP Carey is ready to sell assets. If someone is willing to pay for a property the REIT owns, they will take the profits and find new places to put the money. Recycling assets like this can sometimes make it seem like performance is erratic, but it helps keep the portfolio strong and grow over the long term.
3. Conservative and protected
However, don’t get the idea that WP Carey is a REIT that turns and processes transactions. That’s far from being the case. The truth is, it’s pretty conservative, largely using a sale-leaseback approach in the net rental space. This means that he usually deals directly with companies that own and occupy properties. They sell them to WP Carey to raise money for things like expansion costs, then instantly sign a long-term lease because they still want to use the properties.
Better yet, they agree to pay most of the costs at the property level, leaving WP Carey (making it a bit simpler) to sit down and collect the rent. Net rental properties are generally considered to be low risk bond equivalents.
WPC data by YCharts
This might worry you since inflation seems to be on the rise (inflation tends to be bad for bonds). However, it’s important to remember that WP Carey usually designs the leases that it takes. That’s why 60% of its leases are linked to the Consumer Price Index (CPI), with rental rates increasing with inflation over time. There is therefore significant protection against inflation, which makes the conservative net lease approach even safer for investors.
Sleep well at night
No investment is risk free, but when it comes to real estate investment trusts, WP Carey is as strong as it gets. The dividend record proves it, as does its opportunistic investment approach and the composition of its portfolio. If you have $ 1,000 to implement right now, this high yield REIT would be a great addition to your portfolio.
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Reuben Gregg Brewer owns shares of WP Carey. The Motley Fool owns stocks and recommends Vanguard REIT ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.