WP Carey’s Q3 2024 Earnings Highlights
In Q3, WP Carey reported a decline in funds from operations (FFO), largely due to asset sales and tenant adjustments. The REIT has actively sold or phased out its office property portfolio over the past year, aiming to focus on more profitable sectors. Additionally, one of WP Carey’s significant tenants opted to repurchase a self-storage portfolio that WP Carey had previously leased out.
The impact of these changes led to a 10.6% decline in WP Carey’s FFO per share for Q3 2024, underscoring the financial hit from recent asset sales and portfolio restructuring.
Potential Tenant Challenges and True Value Bankruptcy
WP Carey faces uncertainties with one of its key tenants, True Value, which filed for bankruptcy in October. True Value leases nine properties from WP Carey, contributing 1.4% of the REIT’s annual base rent. While True Value continues to pay its rent and agreed to sell its operations to Do It Best, the bankruptcy filing has added some ambiguity regarding future rental payments for these properties.
Rising Bond Yields Impacting REITs Like WP Carey
The past month also saw a significant increase in 10-year Treasury yields, which jumped from around 3.75% to approximately 4.4%. This surge has made government bonds, a low-risk investment option, more attractive to income-seeking investors, causing many REITs to see price declines as they face increased competition from these bonds.
Higher bond yields have pressured WP Carey’s stock price, but the resulting decrease has raised its dividend yield above 6%, making it an appealing choice for investors seeking income-generating assets.
WP Carey’s Growth Strategy for 2025 and Beyond
Despite the short-term challenges, WP Carey remains optimistic about its future growth. The company continues to expand its portfolio, having completed $971.4 million in real estate investments so far in 2024. WP Carey is on track to reach its guidance of $1.25 billion to $1.5 billion in investments by the year’s end.
Additionally, WP Carey is well-positioned to fund incremental investments in 2025 without issuing new shares at current lower prices. Instead, the REIT can continue capital recycling by selling non-core properties to generate funds for new investments. CEO Jason Fox highlighted that favorable investment conditions, WP Carey’s exit from the office sector, and solid rental growth should support its FFO growth in 2025, despite potential tenant-related issues.
WP Carey’s Dividend Yield and Outlook for 2025
Following the stock’s recent dip, WP Carey’s dividend yield has risen above 6%, making it an attractive income-generating option. The REIT expects its FFO to start growing again next year, which should enable it to continue increasing dividends. WP Carey already boosted its payouts multiple times since strategically exiting the office sector at the end of 2023.
Combining growth with a high dividend yield, WP Carey is positioned to deliver solid total returns in 2025 and beyond, making it a promising option for income-focused investors looking to capitalize on its attractive dividend yield and growth potential.