Earlier this month I discussed REITS as a way to increase the average yield of a portfolio. I also briefly touched on their tax implications, relative risk, and possible returns. Shortly after I went ahead and bought 30 shares of W.P. Carey (WPC). 48 hours later the company increased its quarterly dividend to $1.00/share! This security is yet another form of diversification. My portfolio now has exposure to consumer goods, healthcare, construction, retail, manufacturing, banking, packaged foods, transportation, utilities, agriculture, and real estate.
Diversification is paramount! This was illustrated Friday when Target, Hormel, and General Mills each cratered. Amazon’s alleged acquisition of Whole Foods took the market by storm. This is why I couldn’t be more pleased with WPC. W.P. Carey, founded in 1973, is a global net-lease REIT, with an enterprise value of over $10 billion. This includes 903 properties leased to 214 tenants in 19 different countries. Even better, the company has an average lease term of 9.6 years with 99.1% occupancy.
The high occupancy, long leases, and creditworthy tenants have produced stable cash flows for over 40 years. This allowed W.P. Carey to increase its dividend every year since going public in 1998. But what I like most is the company’s diversification! Not only are they global, but they cover a wide range of different properties. In their portfolio overview W.P. Carey expresses the importance risk mitigation. They explain how overall performance will not be affected by any one industry, tenant, or location.
According to Value Line, WPC carries higher risk and higher reward. They project rising earnings, higher dividends, and an annual return between 12-22%. However, the company only carries a rank of 3 for safety and a B+ for financial strength. The company also receives a BBB credit rating from Standard and Poors. Financial strength is sufficient but the security appears to carry more risk. Most of my companies have stronger balance sheets and better credit ratings. Regardless, the company has been a stable player for over four decades and carries a 6% dividend yield.
DISCLAIMER: I am not a licensed investment advisor or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.