W.P. Carey (NYSE:WPC) a solid income play that remunerates shareholders well, has increased distributions throughout the financial crisis and has a strong, a transaction-based focused.
W.P. Carey specializes in long-term sale-leaseback transactions in which companies sell their company owned real estate and immediately lease it back. Transactions like this benefit both seller and buyer of real estate.
The real estate buyer gets to own commercial real estate, gets a long-term lease and the building is usually already occupied by the seller/tenant.
The seller, usually a corporation trying to turn unrealized gains on real estate into cash, gets a cash infusion that can be used to earn higher returns in the company's core business.
Taking care of and managing properties usually is not a core competency of non-real estate companies and sale-leaseback transactions are a preferred way of companies to raise cash.
W.P. Carey is an internally managed REIT with deep real estate know-how. The REIT also offers advisory services to other non-traded real estate investment trusts for which W.P. Carey charges management fees.
However, its main business is the rental business. At the end of the first quarter 2014, 230 tenants leased approximately 700 properties from W.P. Carey. Total square footage stood at 83 million and its portfolio occupancy stood at an impressive 98%.
1. International exposure
W.P. Carey is a global REIT, thereby bringing substantial diversification benefits to U.S. based investors. The REIT achieves 68% of its annualized base rent in the United States, which makes the country still W.P. Carey's most important commercial real estate market.
32% of W.P. Carey's annualized base rent originates outside the United States in countries like Germany (11%), France (8%), Finland (5%), Poland (3%), the United Kingdom (2%) and others.
2. High degree of diversification de-risks cash flows
Besides being geographically diversified, W.P. Carey also pushes for property type and tenant diversification.
In terms of property types, offices account for 28% of annualized base rent, industrial properties for 26%, warehouses for 19%, retail properties for 14% and self-storage real estate for 4%.
W.P. Carey's biggest tenant, Hellweg, accounts for only 6.5% of total annualized rent and its top ten tenants for 31.5%. It also counts high-profile companies such as the New York Times, Marriott, Carrefour and Dick's among its tenants.
Quality tenants in long-term leases have underpinned W.P. Carey's distribution growth over the last fifteen years and there is a good chance that the REIT will be able to continue its regular dividend hikes in 2014 and beyond.
3. Dividend record
W.P. Carey has proven itself as a dependable dividend payer with distributions rising slowly but steadily since 1998 and, most importantly, throughout the financial crisis.
W.P. Carey is currently on track to continue its dividend hiking spree in 2014. Annualized 2014 distributions now stand at $3.60 per share ($0.90 per share quarterly) which equates to an approximately 5.6% dividend yield.
The Foolish Bottom Line
Investors who desire exposure to a commercial REIT with significant international exposure should consider W.P. Carey. International commercial real estate exposure in Europe and Asia certainly stabilized the company over the last couple of years and provides investors with crucial diversification benefits.
The REIT has also consistently grown its dividends throughout the financial crisis and is on track to reach a 6% dividend yield for investors.