Recent stock market volatility has led a growing number of investors to move toward dividend-paying stocks. After all, these stocks add some reliability through the ups and downs of the market and add income streams.
There are loads of high-quality dividend stocks to choose from, but if I could only buy one right now, here's why W.P. Carey (WPC -0.85%) would be it.
Added security through diversification
W.P. Carey is a diversified real estate investment trust (REIT), meaning it owns and leases a wide range of commercial properties including office, retail, self-storage, and industrial warehouses and distribution centers across the globe.
Diversification is hugely important in hedging risk. And while there are benefits to investing in one industry, diversification reigns supreme during times of volatility. W.P. Carey has the benefit of profiting from booms in certain industries, like self-storage or industrial real estate today, while offsetting losses that may be incurred from other asset classes during challenging economic conditions.
This ultimately leads to steady operational performance even during periods of distress. Not to mention W.P. Carey has growth opportunities to help it maintain its steady performance. The company recently completed the acquisition of Corporate Property Associates 18 – Global Incorporated (CPA:18), which added 65 self-storage facilities to its portfolio while immediately adding to its adjusted funds from operations (AFFO).
Don't underestimate the power of dividend growth
W.P. Carey already pays just over three times the dividend yield of the S&P 500, which is impressive in its own right. But the REIT has also maintained 24 years of consecutive dividend increases, a powerful feat that shouldn't be underestimated by investors.
Dividend growth can be incredibly lucrative when you buy and hold for the long term because it allows your yield to compound exponentially. For example, if you purchased shares of W.P. Carey in 2012 when annual dividend payments were $2.44 and netting a roughly 6% yield, today your initial investment would earn $4.24 in dividends per year, which is a roughly 10% dividend yield.
Not to mention the REIT's share price grew 91% during that time, and you would have collected $42.14 of dividends per share in dividend income over those 10 years -- which is more than the share price was at the time of the original purchase.
W.P. Carey's current payout ratio appears to be on solid footing at 80% of its AFFO. So its dividend increases should be maintained for the foreseeable future and its dividend yields are nearing 5% today.
This stock has recently gained attention from investors due to its reliability and diversification, which pushed shares up 13% over the last year. Despite that, it's still favorably priced, trading around 17 times its AFFO.
