WP Carey (WKN: A1J5SB ) currently has a yield of 5.6%. At least that’s what we get when we compare the company’s current annual dividend of about $4.24 to a share price of $75.91. The big question is how long it will stay that way.
In the end, last-minute investors could have secured a significantly higher dividend. After a divestment phase, the distribution yield was even more than 6% again. A share price that has since risen again prevents that at the moment.
Nevertheless, there could still be a last-minute opportunity for WP Carey. It is of course possible that the REIT will continue to correct, the overall market is volatile. But at the current valuation level, there is at least one attractive value opportunity.
WP Carey: A last-minute chance?
It is very possible, in the medium and long term as well, that investors will say: man, I would have bought into WP Carey at a 5.6% dividend. By the way: The price-to-FFO ratio is likely to be 14.5 in fiscal 2022. This also creates values that can counter inflation.
Especially since I’m convinced that the current yield of 5.6% can only be the beginning. And not in the long term, but possibly also in the medium term. The bottom line is that there is still a solid, defensive portfolio, with 59% of tenants paying more rent in the medium term due to inflation-adjusted contracts. After 2022 with high and sometimes double-digit inflation rates, something suggests to me that there will be significantly more sales in the rental industry in the coming year. I believe that a significant growth in funds from operations per stock at least is possible.
Therefore, if WP Carey delivers solid growth rates, at least the price-to-FFO ratio would continue to get cheaper. There would be room for an increase in the dividend, even above the current quarterly level of 0.2 cents per share per quarter. That could lead to a revaluation, as the dividend yield is already 5.6% right now.
More of a stagnant value stock?
To me, WP Carey’s stock is priced as a stagnant value stock. Still, its 5.6% dividend yield and price-to-FFO ratio of 14.5 (on the low end of its 2022 guidance) don’t look too expensive. When in doubt, investors should ask themselves whether this valuation could also be attractive with stagnation. At least I won’t deny that either.
However, the real last-minute opportunity for me is that the US REIT, with its built-in inflation hedge, has the potential for modest growth. If you play this right and the idle rates stay low, then I’d say: With a yield of 5.6%, the overall package is very attractive.
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Vincent owns shares in WP Carey. The Motley Fool recommends WPCarey.