Interview with W.P Carey (Strong Buy Reaffirmed)

Dear Landlords,

I want to extend a warm welcome to all our new members! We recommend that you start by reading our Welcome Letter by clicking here. It explains why we invest in real estate through REITs and how to get started.  

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on October 4th, 2024, and you can read it by clicking here.

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New members can start researching positions marked as Strong Buy and Buy while taking into account the corresponding risk ratings.

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Interview with W.P Carey (Strong Buy Reaffirmed)

Today we are continuing our series of exclusive interviews with dividend-paying companies with a conversation with blue-chip triple net lease REIT W.P. Carey (WPC). It is a large-sized position in our Retirement Portfolio and we like it due to its:

• Investment grade balance sheet (BBB+ credit rating from S&P)

• Significant liquidity and well-laddered debt maturities

• Attractive dividend yield of ~5.6%

• Well-covered dividend (73% payout ratio)

• Well-diversified portfolio of high-quality industrial, warehouse, essential retail, and personal storage properties.

• Stable and defensive cash flow profile with lengthy triple net leases that have proven to be very resilient in the face of economic calamities such as the Great Recession and the COVID-19 lockdowns.

• Significant (over 50%) CPI-linked rent escalator exposure, which sets it apart from its triple net lease peers as arguably the most inflation-resistant triple net lease REIT.

• Relatively cheap valuation relative to its own history as well as peers.

Ultimately, between its mid-single-digit yield and expected mid-single-digit FFO per share CAGR, WPC is poised to deliver ~10% annualized total returns. Moreover, there is a good chance that - with interest rates expected to decline moving forward - the market will expect a lower yield from WPC, and - as it earns back the respect and trust of Mr. Market after getting through numerous short-term headwinds - it should be rewarded with meaningful valuation multiple expansion and deliver an even higher annualized total return for investors.

Without further ado, here is the transcript from the interview (note that it has been streamlined for clarity and should not be taken as a direct quote from WPC management).

HYI: How would you respond to income investors who do not trust WPC management after it cut its dividend last fall, mere weeks after hiking the dividend, and indicating in the earnings call preceding the cut that any exit from office would be gradually executed? Why should income investors have confidence in the dividend and its growth outlook moving forward?