Predicting the Future Position of W.P. Carey in a Year's Time
As CEO Jason Fox discussed W.P. Carey's (WPC 0.72%) 2024 results, he highlighted the year as the "new baseline" for the company's adjusted funds from operations (FFO), indicating a significant shift for the net lease real estate investment trust (REIT). Despite shrinking slightly due to selling off office properties, W.P. Carey is poised for improvement in the coming year.
The Divided Dividend
In 2024, W.P. Carey paid a $3.49 per share dividend, a 15% decrease from the previous year. This reduction was due to exiting the troubled office sector and selling properties that accounted for 16% of its rent roll. The process took until early 2024, necessitating a dividend reset. However, the dividend has since increased each quarter, swiftly returning to pre-reset levels.
A Fresh Start
The CEO's announcement of 2024 as the "new baseline" for adjusted FFO serves to draw a line in the sand. With office properties continuing to struggle due to the work-from-home trend, W.P. Carey is focusing on growing stronger. The company used the freed-up funds from the office exit and other sales to buy new properties totaling $1.6 billion in 2024.
In 2025, W.P. Carey plans to buy between $1 billion and $1.5 billion of new properties, while also offloading assets valued between $500 million and $1 billion. While this may result in a relatively unchanged portfolio size, the focus on net lease properties and the sale of non-aligned assets will bring about a more streamlined and robust REIT.
Treading Waters, Looking Ahead
Given W.P. Carey's plans for 2025, the year could potentially end where it began, size-wise. However, the impact of the acquisitions and dispositions won't be fully apparent until a closer look is taken—particularly at the improved financial results achieved through higher-return assets. Adding to its appeal is a 6.2% dividend yield backed by a growing dividend, making W.P. Carey a strong contender for investment portfolios.
In order to simplify its operations and focus on more profitable sectors, W.P. Carey (WPC 0.72%) decided to invest heavily in net lease properties in 2024, using funds from the sale of office properties and other assets. Jason Fox, the CEO, mentioned that the company's focus on net lease properties and disposal of non-aligned assets would result in a more streamlined and robust REIT by 2025. With these strategies in place, Carey aims to boost its income through higher-return assets, providing a solid financial foundation for its investors, including a 6.2% dividend yield.
