Is cash burning a hole in your pocket as you try to find a good dividend stock in today's market? It's no easy task, with the S&P 500 index still up near record highs (despite recent volatility). But there's one worthy name that has rewarded investors through thick and thin. In fact, it's almost always a good time to add W.P. Carey (WPC 1.02%) to your portfolio. Here's why.
1. Dividend consistency
This won't surprise you, but 2020 was a very difficult year for landlords. However, W.P. Carey sailed right through the pandemic-related turbulence. The worst it got for the real estate investment trust (REIT) was when it collected 96% of the rents it was owed in May of last year. Today it's basically collecting all of its rents. Given this backdrop, it shouldn't be shocking to learn that the dividend was increased in every quarter of 2020 and again in each of the first three quarters of 2021.
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But that's just a small subset of a much longer streak. W.P. Carey has raised its dividend annually since its IPO in 1998. At this point the disbursement has been increased for 24 years and three quarters, putting it just a single quarter away from hitting 25 consecutive years. In other words, it is right on the cusp of becoming a Dividend Aristocrat -- all that's holding it back is one more dividend payment and the calendar switching to 2022.
The past 25 years or so include the dot-com implosion, the 2007 to 2009 financial crisis, and the 2020 pandemic. So W.P. Carey has clearly managed to deal with adversity while continuing to execute 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 a proxy. In other words, this REIT is a reliable high-yield stock.
2. Opportunistic and active
One of the key reasons for W.P. Carey's long-term success is that management is always looking for ways to grow. The most recent example came in 2020 when, early on in the pandemic, it announced that it was looking for industrial and warehouse assets to buy.
The reasoning was simple: Companies were facing uncertainty and looking to raise cash to shore up their balance sheets. And warehouse and industrial properties were likely to be huge beneficiaries of the ongoing shift toward online shopping, a trend that the pandemic sped up. That's the kind of thing you want to see the companies you own doing.
But there's more to the story here, because W.P. Carey just so happens to be one of the most diversified REITs you can find. The portfolio includes the industrial, warehouse, retail, office, and self storage sectors. And it has material foreign exposure, most of which comes from its European assets. So the REIT really does have the flexibility to put money to work wherever it sees the best opportunities. Many of its peers are focused on just one or two niches.
It's also worth noting that W.P. Carey is willing to sell assets. If someone is willing to pay up for a property that the REIT owns, it will take the profits and find new places to put the cash. Recycling assets like this can sometimes make performance look lumpy, but it helps to keep the portfolio strong and growing over the long term.
3. Conservative and protected
Don't, however, get the idea that W.P. Carey is some wheeling and dealing transaction-happy REIT. That's far from the case. The truth is, it is fairly conservative, largely using a sale/leaseback approach in the net lease space. That means that it usually inks deals directly with companies that own and occupy properties. They sell them to W.P. Carey to raise cash for things like expansion costs and then instantly sign a long-term lease because they still want to use the properties.
Better yet, they agree to pay for most of the property-level costs, leaving W.P. Carey to (simplifying things a bit) sit back and collect the rent. Net lease properties are generally considered low-risk bond equivalents.
That might have you worried given that inflation appears to be spiking (inflation tends to be bad for bonds). However, it's important to remember that W.P. Carey usually designs the leases it takes on. This is why 60% of its leases are linked to the Consumer Price Index (CPI), with lease rates increasing along with inflation over time. So there is material inflation protection here, which makes the conservative net lease approach even safer for investors.
Sleep well at night
No investment is risk-free, but as far as real estate investment trusts go, W.P. Carey is as solid as they come. The dividend record proves this out, as does its opportunistic investment approach and portfolio makeup. If you have $1,000 to put to work right now, this high-yield REIT would make a great portfolio addition.
