Unlocking Passive Income with Beaten-Down REITs
Investors seeking reliable dividend payers with significant upside potential should focus on two undervalued real estate investment trusts (REITs): W.P. Carey (NYSE: WPC) and Realty Income (NYSE: O). Despite the Federal Reserve’s interest rate cut, bond traders are anticipating stronger economic growth, higher inflation, and rising debt levels, causing yields on 10-year Treasury notes to surge by nearly 19% in three months. As a result, shares of slow but steady dividend growth stocks like W.P. Carey and Realty Income have plummeted, offering an average yield above 6% at recent prices.
W.P. Carey: A Diversified REIT with Significant Upside
W.P. Carey, a REIT with hundreds of tenants and 1,430 properties, has been under pressure since spinning off its office portfolio into a new company in 2023. The subsequent dividend cut has led to a declining stock price, now near a 52-week low. However, this has pushed its dividend yield to an attractive 6.5%. With funds from operations (FFO) reaching $5.26 per share during the 12 months ended September 2024, the company has ample room to raise its dividend payout further. W.P. Carey’s 98.8% occupancy rate, 12.2-year average lease term, and rent raises linked to inflation make it an attractive option for income-seeking investors.
Realty Income: A Net Lease REIT with Predictable Dividend Growth
Shares of Realty Income have fallen by about 15% over the past three months, offering a 6% yield and convenient monthly payments. Unlike W.P. Carey, Realty Income’s stock price decline wasn’t due to a dividend cut. In fact, the net lease REIT has raised its payout every quarter for over 27 years. With FFO coming in at $3.89 per share during the 12 months ended last September, Realty Income has the means to produce steady dividend growth for many more years. Its focus on retail and industrial properties, including dollar stores and pharmacies, provides a resilient cash flow stream.
A Compelling Opportunity for Income-Seeking Investors
Both W.P. Carey and Realty Income offer a unique opportunity for investors seeking passive income. With their high yields and potential for significant dividend raises, these REITs can provide a steady stream of income throughout retirement. Before making a decision, consider exploring other high-growth opportunities that could complement your income-focused portfolio.
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