Actual property investing will be very profitable. It may allow traders to generate passive revenue and seize value appreciation.
Nonetheless, actual property investing will also be hectic. You could discover the correct property, cope with tenants, handle contractors to make repairs, and navigate via a number of authorized, tax, and accounting data. Due to that, shopping for a industrial property is not for everybody.
A a lot much less hectic strategy to spend money on actual property is to purchase shares of an actual property funding belief (REIT). W.P. Carey (WPC 0.49%) is a good possibility to think about.
An ultra-low-risk REIT
W.P. Carey is a big diversified REIT. The corporate owns over 1,500 operationally essential properties throughout the economic, warehouse, retail, workplace, and different sectors. It is additional diversified by geographic area, with holdings in North America and Western Europe.
It primarily leases these properties to high-quality tenants underneath long-term triple web leases (NNN). These make the tenant liable for masking upkeep, insurance coverage, and actual property taxes. Consequently, it generates very secure rental revenue.
W.P. Carey pays out a significant portion of its revenue — about 80% of its funds from operations (FFO) in 2022 — to shareholders by way of its dividend. That also provides it a pleasant cushion whereas permitting it to retain some earnings to fund new investments. The REIT gives a roughly 5% dividend yield on the latest share value. This means it may well flip each $1,000 invested in its inventory into about $50 of annual passive revenue.
It additionally has a powerful investment-grade stability sheet. That additional enhances its monetary flexibility, permitting it to make acquisitions whereas rising the dividend.
This mix of options makes W.P. Carey among the many lowest-risk REITs. Due to that, it is a very low-stress funding.
A gradual grower
The corporate has a wonderful observe document of rising its dividend:
This upward development ought to proceed sooner or later, enabling the REIT to steadily provide extra passive revenue to traders.
Hire will increase present the corporate with a stable base of progress. Almost all its leases permit it to extend rents every year. Greater than half of them comprise escalation clauses tied to inflation, whereas a big portion of the remaining leases rise at a set price. With inflation surging over the previous yr, W.P. Carey’s rents are rising at an accelerated price, which it sees persevering with into subsequent yr.
The opposite massive progress driver is acquisitions. W.P. Carey’s stable monetary profile permits it to proceed increasing its diversified actual property portfolio. The REIT invested $1.42 billion final yr on new property additions. About two-thirds of its offers had been for industrial properties and warehouses, sectors the place it is seeing the very best funding alternatives lately.
In the meantime, the corporate entered 2023 with a powerful pipeline of acquisition alternatives, together with over $500 million of transactions in superior phases. It has important liquidity to fund these offers and others that come up all year long. Accretive acquisitions and rising rents at current properties ought to drive regular progress in FFO per share, permitting W.P. Carey to proceed growing its dividend.
The relaxed strategy to spend money on actual property
W.P. Carey makes it simple to spend money on actual property. The REIT allows traders to personal a bit of its high-quality actual property portfolio, entitling them to a share of its secure rental revenue.
And the corporate’s embedded lease progress 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 amassing a steadily rising stream of revenue.