W.P. Carey (WPC -0.54%) stands out as one of the largest REITs specializing in net lease properties. It offers investors highly stable rental income from tenants who cover all property operating expenses. This approach enables the landlord to pay a lucrative dividend.
The REIT's attractive dividend is a great reason to buy and hold its stock. Here's a closer look at W.P. Carey's payout.
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W.P. Carey pays a quarterly dividend of $0.90 per share, or $3.60 annually. With its stock recently under $65, this gives it a yield above 5.5%, much higher than the S&P 500's 1.2%.
The diversified REIT has steadily increased its dividend since resetting the payment level in late 2023, following its strategic decision to exit the office sector and focus on property sectors with better long-term growth drivers, such as industrial real estate. Before that reduction, W.P. Carey had increased its payout every year for a quarter century.
W.P. Carey expects to raise its dividend at around the same rate it increases its adjusted funds from operations (FFO). It has two growth drivers.
Most of its long-term net leases include clauses that either increase rents at a fixed rate each year or adjust rents based on changes in inflation indexes, such as the Consumer Price Index. These mechanisms support low- to mid-single-digit annual base rent growth.
In addition, W.P. Carey uses its remaining free cash flow after paying dividends, along with proceeds from non-core property sales and leveraging its investment-grade balance sheet, to acquire new properties. Its targeted investment range of $1 billion to $1.5 billion for this year should provide incremental sources of rising rental income. These two main growth drivers -- escalating rental rates and new investments -- should support mid-single-digit annual adjusted FFO-per-share growth and ongoing dividend increases.
W.P. Carey's high-yielding and steadily growing dividend makes it a great REIT to buy and hold for passive income from real estate.
