W. P. Carey(US:WPC) The Motley Fool·2024-11-19 11:22Core Viewpoint - W.P. Carey has become an attractive investment opportunity despite a recent dividend cut, now offering a reliable 6.4% yield, which is appealing in the current market for dividend stocks [1]. Group 1: Company Overview - W.P. Carey is a real estate investment trust (REIT) that must distribute at least 90% of its income to shareholders to avoid corporate income tax [2]. - The company has a diversified portfolio, owning approximately 1,430 properties and leasing to 346 tenants, focusing on single-tenant commercial properties [6]. - Its properties are split roughly 2-to-1 between North America and Europe, with no single tenant contributing more than 2.7% of its rental income [7]. Group 2: Dividend and Financial Performance - The company cut its dividend due to significant exposure to office properties, which faced challenges post-COVID-19, accounting for about 16% of its rental income [3]. - W.P. Carey has resumed dividend increases, although it will take time to return to previous dividend levels, with analysts expecting funds from operations (FFO) growth at a low to mid-single-digit rate in the coming years [4]. - The current dividend payout is 76% of the estimated FFO per share, indicating that the company can comfortably afford its current dividend [8]. Group 3: Market Context - The stock price of W.P. Carey is down nearly 40% from its high, primarily influenced by rising interest rates rather than the safety of its dividend [10]. - High 10-year Treasury rates make borrowing more expensive for REITs and reduce their attractiveness compared to other high-yield investments [11]. - The recent dividend cut and high interest rates have contributed to the stock's decline, but the company remains well-positioned for future growth due to its diversified property and tenant base [9][12].