Real property investing could be very profitable. It can allow buyers to generate passive earnings and seize value appreciation.
However, actual property investing will also be irritating. You want to discover the proper property, cope with tenants, handle contractors to make repairs, and navigate by a number of authorized, tax, and accounting info. Because of that, shopping for a business property is not for everybody.
A a lot much less irritating means to make investments in actual property is to purchase shares of an actual property funding belief (REIT). W.P. Carey (NYSE: WPC) is a superb choice to contemplate.
An ultra-low-risk REIT
W.P. Carey is a big diversified REIT. The firm owns over 1,500 operationally essential properties throughout the industrial, warehouse, retail, workplace, and different sectors. It’s additional diversified by geographic area, with holdings in North America and Western Europe.
It primarily leases these properties to high-quality tenants below long-term triple internet leases (NNN). These make the tenant chargeable for protecting upkeep, insurance coverage, and actual property taxes. As a consequence, it generates very steady rental earnings.
W.P. Carey pays out a significant portion of its earnings — about 80% of its funds from operations (FFO) in 2022 — to shareholders through its dividend. That nonetheless offers it a pleasant cushion whereas permitting it to retain some earnings to fund new investments. The REIT provides a roughly 5% dividend yield at the current share value. This implies it could possibly flip each $1,000 invested in its inventory into about $50 of annual passive income.
It additionally has a powerful investment-grade steadiness sheet. That additional enhances its monetary flexibility, permitting it to make acquisitions whereas rising the dividend.
This mixture of options makes W.P. Carey amongst the lowest-risk REITs. Because of that, it is a very low-stress funding.
A gradual grower
The firm has a superb observe document of rising its dividend:
This upward pattern ought to proceed in the future, enabling the REIT to steadily provide extra passive earnings to buyers.
Rent will increase present the firm with a strong base of development. Nearly all its leases permit it to improve rents annually. More than half of them include escalation clauses tied to inflation, whereas a big portion of the remaining leases rise at a set price. With inflation surging over the previous 12 months, W.P. Carey’s rents are rising at an accelerated price, which it sees persevering with into subsequent 12 months.
The different large development driver is acquisitions. W.P. Carey’s strong monetary profile permits it to proceed increasing its diversified actual property portfolio. The REIT invested $1.42 billion final 12 months on new property additions. About two-thirds of its offers have been for industrial properties and warehouses, sectors the place it is seeing the finest funding alternatives as of late.
Meanwhile, the firm entered 2023 with a powerful pipeline of acquisition alternatives, together with over $500 million of transactions in superior levels. It has vital liquidity to fund these offers and others that come up all through the 12 months. Accretive acquisitions and rising rents at current properties ought to drive regular development in FFO per share, permitting W.P. Carey to proceed growing its dividend.
The relaxed means to make investments in actual property
W.P. Carey makes it straightforward to make investments in actual property. The REIT allows buyers to personal a chunk of its high-quality actual property portfolio, entitling them to a share of its steady rental earnings.
And the firm’s embedded lease development and talent to make accretive acquisitions ought to permit it to proceed rising its dividend funds. So an investor can sit again and chill out whereas gathering a steadily rising stream of earnings.
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Matthew DiLallo has positions in W. P. Carey. The Motley Fool recommends W. P. Carey. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.