W.P. Carey's (WPC -0.62%) growth had stalled following its strategic decision to exit the troubled office sector. However, the real estate investment trust (REIT) is now regaining its momentum this year. Rising rental rates and robust investment activity are accelerating the company's earnings growth beyond its initial expectations.
The REIT's accelerating growth puts it in a strong position to continue increasing its 5.5%-yielding dividend, making it an excellent source of passive income from real estate.
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Pressing down the accelerator
W.P. Carey recently reported strong second-quarter results. The diversified REIT delivered a 10.5% increase in rental revenue, which supported a 9.4% rise in adjusted funds from operations (FFO) per share.
The landlord continues to benefit from its high-quality portfolio, secured by long-term net leases with embedded lease escalation clauses. Contractual rental increases drove 2.3% same-property rent growth in the quarter.
Additionally, W.P. Carey got a boost from new investments. The REIT invested $1.6 billion in new properties last year, including a quarterly record $841.3 million in the final period. That gave it a lot of momentum heading into 2025. The company followed that up with $275.1 million of new investments in the first quarter and $548.6 million in the second quarter. These new portfolio additions are providing the REIT with incremental income sources this year.
Nearly all its new investments in the second quarter were industrial and warehouse properties. It closed several sale-leaseback transactions, acquired a property from a third party, and approved a couple of renovation and expansion projects. Its global reach was on full display in the quarter, as W.P. Carey made investments in the U.S., Germany, Spain, Italy, and Mexico.
More growth ahead
W.P. Carey has already secured another $227.2 million of new investments in the third quarter. That brought its year-to-date total to $1.1 billion, exceeding the low end of its initial investment volume guidance range ($1 billion-$1.5 billion). It also has $109.5 million in capital investments and commitments that it expects to complete by the end of this year. This strong volume gave the REIT the confidence to boost its full-year investment outlook to between $1.4 billion and $1.8 billion.
One factor driving that higher investment volume is W.P. Carey's capital recycling strategy. While it completed its office property sales last year, it has been trimming other areas of its portfolio. It has sold $565 million of properties this year, including 15 self-storage facilities not secured by net leases, for $175 million.
These sales are providing it with cash that it's investing in higher-return new investments. W.P. Carey's success in selling noncore properties has it on track to close $900 million to $1.3 billion of dispositions this year, up from its initial plans to sell $500 million to $1 billion of properties.
The REIT's higher investment volume drove it to raise its full-year adjusted FFO-per-share guidance range to between $4.87 and $4.95 (up from $4.82 to $4.92). That new range suggests W.P. Carey will grow its earnings by 4.5% at the midpoint.
The company's rising earnings should support continued dividend increases. W.P. Carey has increased its payout every quarter since resetting the level in late 2023 following its decision to exit the office sector, including by 3.4% already this year.
An excellent passive income investment
W.P. Carey is on track for faster growth in 2025, driven by the successful sale of noncore assets and the redeployment of that capital into higher-returning new property investments. This strategy enables the REIT to continue raising its high-yielding dividend, making it an attractive investment for those seeking reliable, steadily increasing passive income.
