W.P. Carey: Adding More Shares to the Portfolio
In a recent move, an investor has decided to augment their position in W.P. Carey, one of their favorite real estate investment trusts (REITs). The strategic decision comes as the investor makes tax-based shifts in their portfolio. With their daughter now off to college, the investor is focusing on retirement planning and aims to shield as much income from taxes as possible.
The investor’s plan involves moving high-yield stocks like REITs into their Roth accounts, where dividends are not taxed. To offset taxable gains, the investor sold most of their 3M position, which incurred a material loss. As part of this portfolio adjustment, they also increased their holdings in W.P. Carey.
There are several reasons why the investor finds W.P. Carey appealing. One of the main highlights is the company’s impressive track record of consistently increasing its dividend for 25 years. This signifies a strong and reliable business model. W.P. Carey utilizes the net lease approach, which essentially means that tenants are responsible for most property-level operating costs. This helps reduce risk, especially with the REIT’s extensive portfolio of 1,440 properties across various sectors.
Diversification is also a key factor in the investor’s decision to invest more in W.P. Carey. The company has exposure to different sectors, including industrial, warehouse, office, retail, and self-storage. Additionally, it generates around 38% of its rents from outside the U.S., primarily Europe. This level of diversification provides stability and mitigates risks.
Another aspect that appeals to the investor is W.P. Carey’s preference for sale/leaseback transactions. This strategy allows the company to assess the financials of future lessees before signing a lease, enabling them to control the terms of their deals and work with tenants that may have lower credit quality but are willing to pay higher rents.
Taking into account all these factors, the investor made the decision to purchase more shares of W.P. Carey. With a current yield of 6.3%, which is near its highest level in the past decade, the REIT is seen as attractively valued. While the investor acknowledges that the overall shift of moving high-yield stocks to Roth accounts will take years to complete, they are continually making improvements and seizing opportunities along the way.
In conclusion, W.P. Carey’s strong dividend history, net lease approach, diversification, and strategic business model make it an attractive investment for the investor. With the added benefit of an attractive yield, the decision to augment their position in the REIT aligns with their overall portfolio strategy and long-term financial goals.
