If you're looking for a way to boost your income stream while barely lifting a finger, high-yield dividend stocks are a great way to make it happen. While many investors are poring over every development in the artificial intelligence (AI) space, plenty of quality businesses that distribute steadily growing profits are being ignored.
At the moment, you can get a yield of 5.6% from two extremely reliable real estate investment trusts (REITs). W.P. Carey (WPC +0.59%) and Realty Income (O +1.10%) own thousands of commercial properties in the U.S. and abroad. Instead of managing their properties, they employ net leases that transfer all the variable costs associated with building ownership, such as maintenance and taxes, to tenants. At recent prices, $150 is more than enough to scoop up shares of both stocks.
With dozens of different tenants locked into long-term leases that include annual rent escalators, W.P. Carey and Realty Income produce very predictable cash flows. Here's why adding them to a diversified portfolio now and holding them forever looks like a smart way to boost a passive income stream.
1. W.P. Carey
W.P. Carey is a highly diversified net lease REIT that lowered its dividend payout by 20% in 2023 to account for the spinoff of its underperforming office building segment. Its long-term shareholders experienced a significant dividend cut, but they also received shares of Net Lease Office Properties.
NYSE: WPC
Key Data Points
While most investors agree that exiting the office building business was the right decision, many REIT investors still shun the stock. It's been trading at about 28% below the peak it reached in 2022.
And W.P. Carey has already started raising its quarterly payout. Last December, the REIT raised its dividend payout for the fourth time since reducing it in late 2023. At recent prices, the stock offers a great big 5.6% dividend yield; steady raises quarter after quarter seem likely.
W.P. Carey leverages an investment-grade credit rating and a big presence in international markets to invest at interest rates that most of its peers can only dream of. With a majority of its debt originally denominated in euros, the average interest rate on its outstanding debts was just 3.3% at the end of 2024.
Net lease REITs like W.P. Carey don't necessarily need their tenants to succeed. Tenants only need to perform well enough to meet steadily rising rent payments. With one of the most diversified tenant lists in the business, several of this REIT's largest tenants would need to go belly-up before shareholders would need to begin worrying about another dividend reduction. W.P. Carey's largest tenant, Extra Space Storage, is responsible for just 2.7% of the total annualized base rent expected this year, so the list of tenants is diversified.
In 2025, W.P. Carey expects adjusted funds from operations (FFO), a proxy for earnings used to evaluate REITs, to rise at least 2.6% year over year to a range between $4.82 and $4.92 per share. That is more than sufficient to meet a dividend commitment currently set at just $3.52 per share.
In the fourth quarter of 2024, W.P. Carey broke a company record for investment volume. With $1.6 billion in additional investments completed last year, there's a very good chance that dividend payouts from this REIT keep moving in the right direction for many years to come.
2. Realty Income
Since its inception in 1955, Realty Income has been laser-focused on delivering a monthly dividend payout that grows every quarter. The net lease REIT has raised the monthly payment it distributes every three months since it began trading publicly in 1994.
NYSE: O
Key Data Points
Despite decades of reliable dividend payout growth, shares of Realty Income have been under pressure. The stock has been trading about 28% below the peak it reached just before the COVID-19 pandemic reared its head about five years ago.
Realty Income's stock price is down but the REIT hasn't stopped raising its dividend payout from quarter to quarter. Earlier this month, the company announced its 129th dividend increase as a publicly traded company. At recent prices, it offers a 5.6% dividend yield.
Realty Income has an even better credit rating than W.P. Carey and it's nearly as well diversified. Dollar General and Walgreens are its largest tenants. Combined, they're responsible for just 6.6% of annualized base rent. Both of these companies have seen better days but they're more than capable of meeting their building lease commitments.
Realty Income recently reported fourth-quarter adjusted FFO that rose 4.8% year over year to $1.05 per share. Unfortunately, this was $0.01 below Wall Street analysts' consensus expectation. The REIT also issued an adjusted FFO outlook range for 2025 between $4.22 and $4.28 per share. The average analyst watching Realty Income expected management to predict $4.32 per share in adjusted FFO this year.
At the midpoint of management's guided range, adjusted FFO is expected to climb just 1% this year. Looking further ahead, steady growth at a slightly faster pace isn't an unreasonable expectation. In 2024, the company deployed $1.9 billion in investments in Europe and this region could be a big growth driver in the years ahead.
Publicly traded REITs like Realty Income have leased to less than 0.1% of the addressable market for net lease properties across the EU. With room to grow, adding some shares of this well-managed REIT to a diversified portfolio looks like a smart way to boost your passive income stream.
