Unlocking Durable Dividend Income for the Next Decade
High-yielding dividend stocks often come with a warning label: they may be riskier due to underlying issues affecting their valuations. However, when these companies address their problems, their payouts can become more sustainable, making them attractive for long-term investors.
W.P. Carey: A Dividend Powerhouse Reborn
W.P. Carey, a diversified real estate investment trust (REIT), had an impressive 25-year track record of annual dividend increases until last year. The pandemic’s impact on the office sector forced the REIT to reevaluate its portfolio and reset its dividend level. This strategic move allowed W.P. Carey to strengthen its financial foundation, reduce its leverage ratio to 5.4, and invest in properties with better long-term fundamentals, such as industrial real estate.
Today, W.P. Carey offers a robust dividend yield of nearly 6%, which is more sustainable than ever. The company has already increased its dividend three times this year and expects to continue growing its payout at a rate similar to its adjusted funds from operations (FFO) growth. With a revitalized portfolio and balance sheet, W.P. Carey is poised to deliver stable and growing dividend income for the next decade.
EPR Properties: From Adversity to Opportunity
EPR Properties, another REIT, faced significant pandemic-related headwinds, particularly in its experiential real estate portfolio, which includes movie theaters and entertainment venues. The company suspended its dividend during the pandemic but reinstated it in 2021 at a lower rate, allowing it to retain cash flow and enhance its financial flexibility.
EPR Properties has since reduced its exposure to the theater industry, diversifying into other experiential property sectors. The REIT has invested in new acquisitions and development projects, strengthening its portfolio and financial foundation. With a current dividend yield of nearly 7%, EPR Properties is well-positioned to continue expanding its portfolio and dividend in the coming years.
A Long-Term Play for Income Investors
Both W.P. Carey and EPR Properties have navigated pandemic-related challenges and emerged with more sustainable business models. Their high-yielding dividends, backed by strengthened portfolios and financial foundations, make them attractive options for income investors seeking durable dividend income for the next decade.
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