W. P. Carey: A 6%-Yielding REIT Growth Play

seekingalpha09-10

W. P. Carey offers a 6% yield, supported by funds from operations.The REIT completed its office divestment strategy, focusing now on industrial and warehouse assets, with 64% of its portfolio in these...

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Carey offers a 6% yield, supported by funds from operations.The REIT completed its office divestment strategy, focusing now on industrial and warehouse assets, with 64% of its portfolio in these...</p>\n\n<a href=\"https://seekingalpha.com/article/4720174-wp-carey-a-6-percent-yielding-reit-growth-play\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>W. P. 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P. Carey: A 6%-Yielding REIT Growth Play\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-10 22:03 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4720174-wp-carey-a-6-percent-yielding-reit-growth-play><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>W. P. Carey offers a 6% yield, supported by funds from operations.The REIT completed its office divestment strategy, focusing now on industrial and warehouse assets, with 64% of its portfolio in these...</p>\n\n<a href=\"https://seekingalpha.com/article/4720174-wp-carey-a-6-percent-yielding-reit-growth-play\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0607220059.USD","symbol_name":"SCHRODER ISF HONG KONG EQUITY \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4720174-wp-carey-a-6-percent-yielding-reit-growth-play","article_id":"2466592494","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1364805144/image_1364805144.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2466592494","pubTimestamp":1725977010,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"W. P. 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P. Carey Inc"},"translate_title":"W.P.Carey：收益率为6%的REIT增长型投资","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WPC":1,"STAG":1,"REIT":1,"O":1,"NNN":1,"NLOP":1,"CFA.SI":1,"FRT":1},"content_text":"W. P. Carey offers a 6% yield, supported by funds from operations.The REIT completed its office divestment strategy, focusing now on industrial and warehouse assets, with 64% of its portfolio in these categories.Despite lowering FY 2024 AFFO guidance, W. P. Carey maintains strong dividend coverage at 1.34X, indicating a safe and sustainable dividend.The REIT's streamlined portfolio and attractive valuation make it a compelling investment for dividend-focused investors, with potential for AFFO growth.   DNY59/E+ via Getty Images Shares of W. P. Carey (NYSE:WPC) trade at a very attractive 6% yield, and the REIT seems primed to return to a period of growth in its key metrics after it strategically repositioned its portfolio in the last several quarters. The REIT completed its office divestment program in Q2'24 and is, at the same time, aggressively investing in replacement properties that generate rental income for W. P. Carey. The REIT supported its dividend with funds from operations in Q2’24 and raised its dividend yet again, by $0.005/share. While the dividend raise is not that significant in absolute terms, it is good to see that management is applying a growth mindset again and shares are not too expensive, in my opinion. Data by YCharts Previous rating I rated shares of W. P. Carey a strong buy in May as the REIT achieved results with regard to its spin-off and office divestment strategy: A Fallen Angel Set For Resurrection. W. P. Carey has streamlined its real estate portfolio and spun off its office properties into a new business in November 2023, Net Lease Office Properties (NLOP)... which I also previous recommended to investors: This Office REIT Is A Steal. W. P. Carey's dividend is well-supported by adjusted FFO, and the REIT is focusing again on growing its portfolio. W. P. Carey’s strategic portfolio repositioning W. P. Carey effectively completed its office divestment strategy in the second-quarter. While the REIT already spun off its unwanted office properties into Net Lease Office Properties last year, the REIT was planning on selling those office properties that weren’t part of the office spin-off in the open market. In Q2’24, W. P. Carey divested of $62.3M of its office properties under its Office Sale Program, which removed all remaining office assets from its balance sheet. The new portfolio structure therefore now revolves around a mix of industrial and warehouse real estate assets. As of the end of June, 64% of W. P. Carey’s real estate assets related to the industrial and warehouse categories, compared to 53% in the year-earlier period. W. P. Carey  W. P. Carey experienced solid tailwinds for its same store rent growth in the second quarter, with retail and industrial segments leading the way: retail same store growth totaled 3.5% year-over-year, followed by industrial with a 3.1% organic rent growth rate. Organic rent growth is a key way for the REIT to grow its funds from operations, next to acquisitions. W. P. Carey  Acquisitions are obviously going to become more attractive for W. P. Carey now that it completed its Office Sale Program and narrowed down its operating focus. Year-to-date, W. P. Carey already invested in $641M worth of new real estate, of which $293.4M were spent in the second-quarter. Growth via acquisitions as well as robust same store organic rental growth in retail and industrial are why I believe W. P. Carey could return to a period of growth in the next 1-2 years. Turning to AFFO and dividend coverage. W. P. Carey generated $257.1M in adjusted FFO in the second-quarter, showing a negative year-over-year growth rate of 12%. The decline in AFFO is due to the company's changing portfolio orientation and since the REIT closed its Office Sale Program in Q2'24, I don't expect a decline in adjusted FFO going forward. Additionally, the reset dividend has been well-supported by FFO in the last several quarters. W. P. Carey  W. P. Carey’s adjusted funds from operations in Q2’24 totaled $1.17 per share, which is about 14% below last year’s level of $1.36 per-share. Since W. P. Carey paid a dividend of $0.87 per-share in Q2’24, the REIT currently deals with a dividend coverage ratio of 1.34X. This compares to dividend coverage ratios of 1.32X for Q1’24 and 1.38X for Q4’23. W. P. Carey’s valuation W. P. Carey lowered its guidance for FY 2024 adjusted FFO to $4.63-4.73 per-share, showing a decline of $0.02/share at the bottom and top end of guidance. The guidance currently implies a P/AFFO ratio of 13.2X. In May, when my last work on the REIT was published, W. P. Carey's shares traded at 12.7X AFFO. W. P. Carey is still quite cheap when compared against other REITs in the retail and industrial segments. The following chart shows the valuation multipliers for REITs such as STAG Industrial (STAG), Realty Income (O), NNN REIT (NNN) and Federal Realty Investment (FRT). Currently, shares of W. P. Carey trades at about 14% below the industry group average, chiefly because of last year's change in portfolio orientation that also led to a dividend reset. I believe, with a little bit of time, shares of W. P. Carey could revalue to the industry group average ratio of 15.3X, which implies a fair value estimate of $71.60 per-share.         WPC vs. REIT Rivals Share Price AFFO Guidance P/AFFO Ratio   W. P. Carey $61.63 $4.63 - $4.73 13.2X   STAG Industrial $39.54 $2.40 - $2.44* 16.3X   Realty Income $62.86 $4.15 - $4.21 15.0X   National Retail Properties $48.65 $3.31 - $3.37 14.6X   Federal Realty Investment $117.12 $6.70 - $6.88 17.2X       Average: 15.3X   Click to enlarge (Source: Author) *STAG Industrial FFO guidance reflects author's estimates. Risks with W. P. Carey The REIT lowered its AFFO guidance for the current year as well as its acquisition guidance as two deals in the pipeline didn’t materialize. Nonetheless, W. P. Carey is set to return to a period of AFFO growth as it ramping up its spending on acquisitions. What would change my mind about W. P. Carey is if the REIT were to see a deterioration in its dividend coverage profile or failed to reboot its acquisition business in a material way. Final thoughts  W. P. Carey went through a major strategic realignment of its portfolio structure in the last three quarters, which caused the REIT to spin off or sell all of its high-risk office properties. As a result, W. P. Carey now offers a more streamlined and concentrated real estate portfolio and the REIT has a shot at returning to AFFO growth next year, with the help of acquisitions and organic rental growth in industrial and retail. W. P. Carey’s dividend and AFFO are both set to grow and the REIT had a dividend coverage ratio in excess of 1.3X in Q2'24, meaning the dividend is about as safe as it gets at its current level. In my opinion, W. P. Carey is an attractive REIT play for dividend investors, as its shares are cheap, and the dividend clearly has room to grow in the coming quarters.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466592494"}