W.P. Carey Cheers Investors With Dividend Hike: Is It Sustainable?

Core Viewpoint - W.P. Carey (WPC) announced a 1.1% dividend increase, raising the first-quarter 2025 cash dividend to 89 cents per share, which positively impacted its stock price, closing 1.65% higher on March 14 [1][2]. Dividend Announcement - The increased dividend will be paid on April 15 to shareholders on record as of March 31, 2025, resulting in an annual dividend of $3.56 per share and an annualized yield of 5.7% based on a closing price of $62.66 on March 14 [2]. Historical Dividend Changes - WPC previously reduced its dividend to 86 cents in December 2023 from $1.07 due to a strategic plan to exit office assets and maintain a lower payout ratio. Since then, the company has increased its dividend three times, including the latest hike [3]. Portfolio and Occupancy - WPC has a large portfolio of single-tenant net lease commercial real estate, with a portfolio occupancy rate of 98.6% as of December 31, 2024, which supports better risk-adjusted returns [4]. Revenue Generation - The portfolio is diversified by tenant, industry, property type, and geography, with over 99% of annualized base rent coming from leases with contractual rent increases. The company reported a 2.6% growth in contractual same-store rent for Q4 2024 [5]. Financial Health - WPC has a strong balance sheet with $640 million in cash and cash equivalents and a pro rata net debt to EBITDA ratio of 5.5X. The company holds investment-grade ratings of BBB+ from S&P Global Ratings and Baa1 from Moody's, facilitating favorable access to debt markets [6]. Earnings Performance - In Q4 2024, WPC reported adjusted funds from operations (FFO) per share of $1.21, exceeding the Zacks Consensus Estimate of $1.19 and reflecting a 1.7% improvement from the previous year, driven by growth in lease revenues [7]. Stock Performance - WPC shares have increased by 15.5% over the past three months, outperforming the industry growth of 3.5% [8].