W.P. Carey: A New Chapter in 2024
In his discussion of W.P. Carey‘s (NYSE: WPC) 2024 results, CEO Jason Fox declared that the year represents a “new baseline” for the company’s adjusted funds from operations (FFO). This indicates a pivotal change for the net lease real estate investment trust (REIT). While W.P. Carey may not grow significantly in size over the next year, improvements are expected in its overall quality.
Impact of Dividend Changes
W.P. Carey paid out $3.49 per share in dividends in 2024, reflecting a decrease of approximately 15% from 2023. Although this drop may seem negative, it stemmed from a strategic decision to exit the struggling office sector. This decision involved selling properties that made up around 16% of the company’s rent roll, a process that didn’t conclude until early 2024, necessitating the dividend reset.
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Despite the dividend cut, W.P. Carey ended 2024 with a stronger portfolio. The work-from-home trend, which gained traction during the COVID-19 pandemic, has continued to impact office properties negatively. Nevertheless, the company has increased its dividend each quarter since the reset, signaling a return to regular growth, indicative of a REIT that is rebuilding with optimism.
Fox’s statement about 2024 serving as a new baseline conveys a message to investors: While last year was challenging, the outlook is improving. However, the forecast for 2025 appears mixed.
Strategic Asset Management
Typically, REITs expand through acquisitions. Consequently, the divestment of a significant portion of office properties resulted in a smaller W.P. Carey in 2024. However, the funds generated from these sales—combined with other asset sales—totaled about $1.6 billion, with half of that occurring in the fourth quarter. Benefits from these new purchases won’t materialize until 2025.
In the coming year, W.P. Carey anticipates acquiring between $1 billion and $1.5 billion in new properties, while simultaneously selling assets worth between $500 million and $1 billion. This suggests that, while the REIT may not increase in size by the end of 2025, it will enhance the quality of its portfolio.
WPC Dividend Per Share (Quarterly) data by YCharts.
Many assets earmarked for sale do not align with W.P. Carey’s core net lease focus. Among these are self-storage operating assets, which, while not problematic, complicate the company’s business model for investors. Streamlining around the key net lease portfolio is expected to yield a more focused and comprehensible REIT.
W.P. Carey is optimistic that it can sell some properties for attractive prices, allowing reinvestment into higher-return assets. Thus, even as 2024 set a new FFO baseline, the reorganization of its portfolio is still in progress—a potentially positive direction for the future.
Pursuing Stability and Growth
With W.P. Carey’s guidance for 2025 indicating stability in size, some may conclude that the year will be uneventful. However, a closer inspection reveals that the company intends to improve its operations. Coupled with a 6.2% dividend yield supported by a growing dividend, W.P. Carey positions itself as a tempting high-yield REIT for investors interested in enhancing their portfolios.
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Reuben Gregg Brewer has positions in W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
