Recent Buy

buyBuying high-quality dividend growth stocks is just really one of my favorite pastimes. Much like someone might love to engage in a shopping spree at the local mall, the stock market is my “mall” and stocks that pay and grow dividends are my “merchandise”.

I foreshadowed this stock purchase, like I usually do, when I published my watch list earlier this month. I leave nothing for surprise, so I guess this blog isn’t quite as suspenseful as it could be. But it’s all in the name of providing an honest look into the journey to financial independence in real-time.

I purchased 20 shares of W.P. Carey Inc. (WPC) on 4/9/15 for $67.15 per share.

Overview

W.P. Carey Inc. is a global real estate investment trust that provides services including long-term sale-leaseback and build-to-suit financing solutions.

As of December 31, 2014, the company has 219 tenants across 783 properties in 18 countries. The occupancy rate is 98.6% and the average lease term is 9.1 years.

They operate in two segments: Real Estate Ownership (71% of fiscal year 2014 revenue) and Investment Management (29%).

They were founded in 1973 but reorganized as a REIT in 2012.

Fundamentals

WPC might not be a well-known stock, but this belies their impressive nature.

First up is growth. We’ll see what they’ve been able to do over the last decade across the top and bottom lines.

WPC has increased revenue from $174.117 million in fiscal year 2005 to $906.193 million in FY 2014. That’s a compound annual growth rate of 20.12%.

However, it’s important to keep in mind that REITs, due to their unique tax structure, routinely issue shares to help fund operations and growth – WPC has more than doubled their share count over this time frame, from approximately 39 million to 100 million (most of this exclusive to the period after 2012).

As such, looking at results on a per-share basis is much more worthwhile and relevant. Revenue on a per-share basis has grown at a compound annual rate of approximately 8.20%.

In addition, because REITs like WPC consistently have rather significant depreciation and amortization charges that aren’t truly reflective of the company’s profitability, we’ll look at the growth of funds from operations (FFO adds depreciation and amortization back into earnings) on a per-share basis.

AFFO per share has grown from $2.53 to $4.56 over this period, which is a CAGR of 6.76%.

Really solid results here. Any REIT that can grow its per-share revenue and profit in the upper single digits over a long period of time should do quite well for its shareholders.

Now, a stock’s dividend metrics is one of the very first areas I look at before buying a stock. And in this regard, WPC absolutely does not disappoint.

Check it out:

They’ve increased their dividend for the past 18 consecutive years, which is an excellent streak that’s actively improving.

But it gets better. The dividend growth rate over the last decade is a stout 7.5%, which has actually been increasing with even higher dividend growth over the last five years.

And that’s particularly attractive when considering the stock’s yield is a pretty monstrous 5.67%.

Assuming a static valuation, the sum of a stock’s yield and dividend growth rate is an approximation of long-term total returns. So a yield near 6% with a long-term growth rate over 7% is obviously incredibly appealing.

The payout ratio is moderately high at 83.6% of TTM AFFO, but that’s not uncommon across REITs. And management’s guidance for FY 2015 adjusted funds from operations of $4.76 to $5.02 gives even more support to the dividend and the growth of it.

The balance sheet has expanded in recent years due to the company’s ability to continue accumulating revenue-generating assets. Nothing to dislike here, however, with total liabilities of $4.7 billion against $3.8 billion in total shareholders’ equity. Their credit rating as of the end of FY 2014 is BBB/Baa2.

As aforementioned, WPC is accumulating assets at a rather rapid rate in order to fuel growth. During FY 2014 alone, they closed on just over $900 million in total acquisitions for the real estate portfolio. And 2015 is off to a great start already, as they’ve closed on $390 million in acquisitions YTD (as of February 24, 2015).

Qualitative Aspects

What I really like about WPC is that they bring something new to my portfolio. I own three other REITs currently: Digital Realty Trust, Inc. (DLR), Omega Healthcare Investors Inc. (OHI), and Realty Income Corp. (O). Each one of these REITs provides something unique in terms of their properties, exposure, expertise, and area of focus.

WPC brings international exposure, diversified operations between advisory services and managed real estate, and a unique property portfolio to the table.

Their top 10 tenants include the diverse likes of Hellweg, State of Andalusia, and Marriott International Inc. (MAR). So you’re looking at exposure to industries across international retail, government, and hospitality right there. But the diversity across their properties is actually pretty incredible, especially considering the size of their portfolio.

Although their exposure to retail is quite high at near 20% of the portfolio, government (6.3%), automobile (5.3%), and healthcare, education, and childcare (6.1%), for instance, also account for significant exposure. All in all, WPC lists 25 different industries in which their properties are purposed and used for.

They’re also diversified geographically, with most of their revenue (~65%) generated from properties located in the US, but Northern and Western Europe contributing significantly as well. Major markets in Europe include Germany, France, and Spain.

Commercial real estate is one of those areas that is obviously incredibly difficult for a retail investor like myself to invest in individually, but is also quite attractive. And that’s where a REIT like WPC comes in.

Physical real estate is absolutely necessary for most businesses across the world, and WPC fills that need. They sign tenants to long-term contracts with most of these contracts (94%) providing for rent increases that are either fixed or tied to CPI. So, essentially, WPC acts as a landlord. They scout properties, acquire assets, lease the properties to tenants, handle the management, and collect a check.

And then I, as a shareholder, then later collect a portion of that check via the dividend. In addition, I participate in any increase in the value of the underlying properties through the value of equity in the REIT. So this gives me almost instantaneous exposure to international commercial real estate on a large scale with liquidity, which would otherwise be impossible.

As long as global population and wealth rises over time, the need to conduct business across the 25 different industries that WPC is exposed to will also likely continue to persist and grow. As such, there should be future deals that WPC can make which can grow the trust, FFO, and the dividend.

What’s really unique about WPC is that they’re diversified in so many ways. So when one industry, economy, or market is perhaps temporarily troublesome, the REIT has many other avenues to continue growing and producing revenue to capitalize on. And they also earn a rather large portion of their revenue through management fees, which can potentially buoy any short-term slowdowns in the real estate portfolio.

Risks

WPC is truly international, so they face currency risks like any other company doing business globally. In addition, they face interest rate risk in the sense that as rates rise the cost of capital increases. Though this is also true for almost every business out there that relies on some debt to conduct business and grow, this is exacerbated for REITs because of their structure.

Another risk is that 25% of WPC’s leases expire within the next five years. Any issues with renewals could be problematic.

Furthermore, only 26% of their tenants are investment-grade.

Lastly, although they have substantial experience in their field dating back decades, their operating history as a REIT is rather short.

Valuation

WPC’s P/AFFO ratio is 14.73, which I view as attractive. The P/FFO ratio is similar to the P/E ratio for most other stocks, so you can see why a ratio below 15 is notable. In addition, the P/B is below its five-year average as is the yield.

I valued shares using a dividend discount model analysis with a 8% discount rate and a very conservative 4% long-term dividend growth rate. That’s almost half the DGR over the last decade, which gives a rather large margin of safety to account for rising rates and some of the other unique risks I touched on above. The DDM analysis gives me a fair value of $99.06.

The stock could be significantly undervalued here as it exhibits a rare and elusive combination of yield and dividend growth that are both quite high. It’s just not particularly often that you can buy a stock with a yield near 6% and growth in the upper single digits.

Conclusion

This is a really interesting REIT. I love the diversification across the business as it relates to revenue sources, geographies, and industries. This should provide them an ability to manage through temporary crises, as we can see over the last 10 years.

The fundamentals across the board are excellent. And the stock’s combination of yield and growth is just extremely rare. Even if the dividend growth rate is cut in half permanently, the stock is still a great deal right now.

This purchase adds $76.20 to my annual dividend income, based on the current $0.9525 quarterly dividend.

I usually include current valuation opinions from other analysts, but neither Morningstar nor S&P Capital IQ follow this stock.

I’ll update my Freedom Fund in early May to reflect this recent purchase.

Full Disclosure: Long WPC, DLR, OHI, and O.

What do you think of WPC here? Like the fundamentals? Is the valuation attractive? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Edit: Corrected purchase date. 

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104 Comments

  1. Great buy. I just published my article about WPC yesterday in Seeking Alpha. Really like the company at the current valuation. Feel free to take a look. seekingalpha.com/article/3067556?source=ansh-d

  2. “I purchased 20 shares of W.P. Carey Inc. (WPC) on 4/19/15 for $67.15 per share.”

    Did you mean to say that you made the purchase on 4/9/15? Or have you discovered the secret to time travel? 🙂

  3. Khen,

    Looks like we’re pretty much on the same page there in regards to not only the stock, but also on formatting a stock analysis article. 🙂

    Thanks for dropping by!

    Take care.

  4. Great addition to your dividend growth portfolio! I recently bought OHI to diversify my holdings. WPC is in my watch list.

    So, you are $76.20 close to your financial freedom. Opps I forgot to mention its compounding growth in the upcoming years 😀 .

    Keep moving forward!

    Best Regards,

    FJ

  5. DM,

    Thanks for the heads up about this stock, was unaware until reading your post but will do some research to determine whether it deserves a spot on my watchlist. Its great to see that you have diversity among your REIT holdings. Hope all goes well with this purchase!

    Cheers,
    Dividend Odyssey

  6. WPC has the dividend payout ratio 149% (>100%). I think it could be a little problem. I myself prefer dividend stocks with payout ratio <100%.

  7. FV,

    Agreed. O is one of the best, though WPC offers a higher yield, better DGR, and much lower valuation right now. I love my O, but WPC appears to be the better bet right now. 🙂

    Cheers!

  8. FJ,

    Just one step closer, my friend. 🙂

    OHI is another high-quality REIT. Wish I would have bought more when I initiated my stake. Hope to add to it at some point here.

    Thanks for stopping by.

    Best regards!

  9. DO,

    Yeah, I love having some exposure to real estate, and the REITs in the portfolio all offer me something a bit different. Overall, I’ve done pretty well in the REIT space, so I’m excited to add WPC to the mix here. We’ll see how it goes! 🙂

    Cheers.

  10. Looks like you’ve been increasing your real estate exposure through REITs which is definitely a much more hands off approach than being a landlord. And much more diversified too. Looks like a solid buy here. I’ve been looking at WPC myself so it’s pretty reassuring that you find them attractive here as well. Solid buy Jason!

  11. turbo,

    As mentioned in the article, EPS isn’t a good measuring stick for a REIT’s profit. I’d recommend doing some further reading on REITs and how/why to use FFO/AFFO.

    Take care!

  12. JC,

    I definitely prefer the hands-off approach. REITs are easier, more diversified, scalable, and pretty liquid. I like to just sit back and collect a check, thank you very much. 🙂

    Thanks for the support. I wouldn’t mind adding some more WPC here. We’ll see what the funds look like as the weeks/months progress.

    Best wishes!

  13. Excellent addition. I owned WPC once before and to be honest wish I still did. Enjoy those fat dividends!

  14. With the recent announcement of Walgreens closing 200 stores, what affects will this have on Realty Income Corp?

  15. Adam,

    O manages about 120 of WBA’s 8,200 or so stores, so it depends on how many of those stores are owned/run by O. Looking at the numbers, the odds of O being affected dramatically appear to be low. In addition, it looks like WBA plans to open that many stores as well.

    Best regards.

  16. First off… .whhhhaaaaa… another buy so soon!?! Didn’t expect to see this coming. But I did expect to see WPC. I mentioned it my last comment when you bought AAPL. Quite honestly as a REIT it does look quite compelling and a nice complement to O which I know is in many dividend growth portfolios. I may be buying into the REIT space sooner than expected as I had a 5 year CD in an IRA mature and I rolled the funds into my stock account. The taxes were too high to do an IRA to ROTH conversion so it looks like I’ll have three accounts now with a taxable, ROTH and IRA. Looking to fill it with REITs such as HCP, VTR, OHI and perhaps WPC now. Keep growing that snowball.

  17. DH,

    Haha! Yeah, the quicker I can turn cash into cash flow, the better. 🙂

    Wish you much luck in deciding which, if any, REITs work for you and your portfolio. Definitely some solid choices out there!

    Thanks for stopping by.

    Best wishes.

  18. KeithX,

    Agreed. There are some better bargains out there than others in the REIT space, but I don’t think they’re particularly outstanding as a group in terms of valuation. WPC appears to be one of the better choices right now, in my view. Would love to add some more O, but the valuation just doesn’t work for me here. O’s valuation compared to WPC’s is much, much higher. Add in the higher yield that WPC offers along with much better dividend growth, and the choice was easy for me.

    Thanks for stopping by. Glad to be a fellow shareholder with you in a number of high-quality companies. 🙂

    Best regards.

  19. Hey Jason,

    Great buy! I initiated a position in WPC a few days ago myself. Happy to be a fellow share holder.

    I have what may be an ignorant question for you. Many of the financial sites – Google finance, Yahoo finance, Motley Fool, etc. – post p/e values for many corporations, but there doesn’t seem to be somewhere that readily posts p/ffo and p/affo for REITS. Do you know of a site? Or are you just getting this information from the various websites for specific REITs from their reports?
    Also, where are you getting your 10 year information from?
    Thank you ahead of time! You keep a fantastic blog and you’ve been a huge inspiration for me in my dividend/dividend growth investing.

  20. Josh,

    Thanks for the kind words. Really appreciate it. Glad you find a lot of value in the blog. 🙂

    As far as your question goes, I find the best place for a company’s information is always the company itself. So that’s annual reports and financial statements. This is especially true for REITs because, as you’ve noticed, the financial sites just don’t get it right.

    Morningstar is one of the best tools out there. I usually find it fairly accurate. But it’s always best to check with a company’s financial reports to make sure everything is kosher. Morningstar doesn’t have FFO information, however, as far as I’m aware.

    Hope that helps!

    Best regards.

  21. Wow, another buy right on the heels of your recent purchase of AAPL? What a fantastic way to start the month of April, haha!

    Jason, I was wondering what your thoughts were regarding the REIT space and its dividends. Since REIT dividends get taxed at the ordinary income level, when you are in lower tax brackets the fat yields easily make up for the taxes you pay, but as one climbs into higher tax brackets, taxes can start taking a pretty large bite out of those dividends. Would you consider reducing your positions in REITs as your income grows over time? Or would you simply invest only a small portion of your portfolio in the REIT space and keep it more or less at that same level throughout?

  22. Hi Jason, you’re in fire as I see. Yet another stock which was not in my radar at all! Seems like a good one.
    I am trying to figure out which stocks I should buy if my RothIRA money (currently sitting in money market)… that could be one I guess. Best!

  23. 5.67% yield is nothing to sneeze at–good find. Seems like you’re well aware of all the headwinds and tailwinds facing REITs right now.

    Also, congrats on adding $75 to your annual income! Doesn’t seem like a lot in isolation, but every purchase you make adds up!

    Really love your comment fabout how the stock market is like a shopping mall to you. I feel the same way . . .

  24. ZTZ,

    Definitely. I love deploying capital fairly quickly after receiving it. It’s like a hot potato – gotta get rid of it. 🙂

    As far as REITs and taxation, I keep REITs in general to a pretty small portion of the portfolio. That’s due to a variety of reasons, including the tax situation. However, the additional yield makes up for the less advantageous dividend income, in my view. And that’s especially true for me in the way that I kind of look at them as ancillary positions. But it really all depends on your personal situation. If you’re living off of, say, $30k in dividend income, you’re not going to be paying very much (or probably any) in taxes anyway.

    Thanks for stopping by!

    Best wishes.

  25. Fabsavings,

    Glad I could shed some light on another stock. 🙂

    WPC has one of the best combinations of yield and growth out there, especially among those high-quality stocks out there with 15+ years of dividend raises. The more recent dividend growth (inside the last five years) is especially impressive. We’ll see how it goes, but I’m pretty optimistic here.

    Cheers!

  26. Professor,

    $75 here and there definitely adds up in a hurry. That’s what I love about the dividend income reports. You can see how $20 from this stock and $30 from that stock adds up to literally hundreds or thousands of dollars per month.

    The stock market is just a store for me, full of some of the best merchandise in the world. Glad to have a fellow “shopper” on board! 🙂

    Take care.

  27. Great buy Jason. I agree with you on O that it is not attractively valued right now and WPC offers the better yield and better value for the buck. I got myself some OHI lately in the REIT sector and for the health care exposure.

    Take care!

  28. DM,

    Nice! I knew only time would tell before you purchased this incredible looking REIT. I love the valuation, the yield, the growth and the diversification of tenants. I’ll have to see how this would fit in my portfolio, I think you made a really great move on this one.

    Congrats again Mantra, still is suspenseful even if you had provided insight from your watch list. Keep the consistency going, pumped for these dividends to start rolling in for you!

    -Lanny

  29. That’s a good point, you’d need to be making nearly 100k a year as single individual and 150k+ a year as a married couple filing jointly to even get past the 25% bracket, so it’s safe to say that taxes eating up REIT divis would require some serious income.

    Thanks for the response!

  30. FFF,

    Thanks!

    I think we have to be selective in the REIT space. A lot of them have run up quite a bit over the last few years due to their attractive yields, among other reasons. Some of them have the fundamentals to back that up, some don’t. But WPC still seems to be in value territory, in my opinion. Unless the bottom totally falls out, this should be a very solid long-term investment. 🙂

    Thanks for dropping by!

    Take care.

  31. Lanny,

    Thanks so much. Glad you like this one.

    I really love the property portfolio. The diversification across geographies, industries, and tenants is pretty impressive for the size of the REIT. And they continue to close on deals that make sense. I’m hoping for dividend growth at least at that 4% level; anything above that is just gravy. 🙂

    Thanks for stopping by. Hope you’re having a great week over there!

    Best wishes.

  32. Great buy, i put the company in my REITS radar, i will wait a couple of months until the market expects interest increasement because reits are really sensitive to this news

    Do you think it will affect the future valuation?

    Regards!

  33. Finanasmania,

    I’m not particularly concerned about interest rates. If rates rise, that’s probably because the economy is doing better and can support such a move. As such, business in general should do well. I’d focus more on valuations and individual business performance.

    Keep in mind as well that rising rates affect all businesses in some manner, not just REITs. To sit around and bite my fingernails over what interest rates are going to do is a complete waste of time, in my view. I think Buffett once quipped that he thought about interest rates exactly zero times over his entire life when it came to investing decisions.

    Cheers!

  34. Financial Freedom – Kingdom come 😉

    Well, after your watchlist thread I checked out WPC and wrote here my findings concerning Hellweg. Anyway, for my part a REIT right now with the interest rate theme looming… being no market timer on the one hand and having limited access to capital (surprise) on the other … I followed your “advice” concerning ADM instead.

    After EMR my personal second Recent Buy caused by your input – many thanks!!!

    Best wishes
    Thorsten

  35. Have you ever considered establishing a position in Federal Realty Investment Trust (FRT)? Its yield is lower than many of the other REITs at 2.3%. However, its overall performance over the years has been better than that of most other REITs, including Realty Income.

  36. Thorsten,

    I’m building what I call “Chateau Freedom” one brick at a time. 🙂

    Nice move there on ADM. Great company. Hope to become a fellow shareholder one of these days. So many stocks, so little capital. But it’s good to have first world problems!

    Thanks for stopping by.

    Best regards.

  37. Jim,

    I looked at FRT a while back, but couldn’t really make it work for me. The 10-year DGR is only 5%, which is quite low for a stock with a yield where it is. The numbers were even worse when I looked before, if I remember correctly.

    “However, its overall performance over the years has been better than that of most other REITs, including Realty Income.”

    I’m surprised that it’s so close. Looks like the 10-year performance is pretty close, with FRT edging O out. O has them beat over 20 years. Pretty interesting. Looks like WPC beats them both handily over the last 10 years, however.

    I personally don’t plan on owning many more REITs beyond what I already have. I’ll probably open a position in maybe one more healthcare REIT. Beyond that, hard to say. But FRT has done well for shareholders.

    Thanks for sharing!

    Best wishes.

  38. Hi Jason –

    Nice solid buy here!

    Just curious, why do you not hold your REIT stocks in a Roth? Why mess with the taxes? I only hold O, and it is in my Roth as that is the way our accountant wants it – and I listen to what he tells me!!

    Congrats on the purchase – this should do quite well for you!

    Best,

    Ray

  39. I apologize in advance if I misunderstood, but I thought you were at one point looking to limit the number of companies you own to be no greater than 50. Your last handful of investments have all been incremental (new investments). Are you still able to manage your portfolio to ensure existing investments are still financially sound? Do you have a strategy you can share? Thanks. Love the blog!

  40. DM,
    I have also been looking at some REIT’s because the only holding I own in that sector is INN. That holding has actually been my best performer out of the 37 holdings that I currently own. I think I am up over 60% at this point and I wish I would have added more in the beginning. Anyways WPC seems like an interesting choice and I didn’t expect you to get back into REIT’s because of some of the uncertainty surrounds rising interest rates. Thanks for sharing your recent buy!

  41. Can you quantify? What metrics are you using where O is “much, much higher” than WPC? I’m just trying to learn…Thanks!

  42. DM,

    WPC is a smart move. Their yield and growth are exceptional, and I like their mix of tenants. REITs could see a nice year on the horizon, if the naysayers get their wish and prices fall (that’d be sweet). WPC, HPC, OHI, and DLR are all on my watch list, and I am long O. Those 5 I think are all solid plays, though perhaps the price could be sweeter on some of them.

    Enjoy that new income!
    -Gremlin

  43. The growth in the last decade for WPC has been fantastic. Hopefully they don’t get too careless and start bolting on acquisitions in sloppy manners like ARCP.

    I like that REITs cant invest more broadly in real estate than I can myself, and many tend to grow payouts by 3-4% each year as well with a solid starting yield to boot.

    Unfortunately, REITs don’t get the same tax or leverage benefits of physical real estate, but do come with close to zero work… after all, WPC will never call you to find a plumber… something I’m dealing with right now to get a faucet repaired at my rental.

    I actually got into WPC earlier this year, but unfortunately a few dollars higher per share. Not a big difference, since the entry yield was solidly in the mid 5.x range. I’m hoping to accumulate a few more REITs over the next year or two. I like the business model for equity REITs.

    The space is difficult as there are maybe 10-15 large and well known REITs with fair track records of operating performance and growth, but seems to drop off into much less well known and smaller firms thereafter. It’s certainly a space to research further for myself to balance out the growth names I’d really like to have as well.

    Happy hunting!

  44. I have 36 shares of WPC that are up like 25%. I have it on my watch list to double the position, but waiting for little more pull back. Very happy WPC share holder. Any opinion on SKT?

  45. DM,

    Glad to hear INN’s performed well for you. I’ve done pretty well with REITs as well, even after factoring in my loss in ARCP. They offer access to real estate to us little guys in a really approachable and easy manner. 🙂

    I’m not particularly concerned about interest rates. I’ve been hearing that same song for about three years now. Same thing with a big stock market correction. As I’ve mentioned many times, listening to noise like that will only distract you.

    Thanks for stopping by!

    Best regards.

  46. KeithX,

    Sure. O’s P/FFO (a similar valuation metric to P/E) is about 19 right now. That’s not just absolutely high, but also relatively quite high if you look out over its history. In addition, the yield right now is among the lowest its been over the last five or so years. That’s just comparing O to itself, ignoring the spread of ~120 basis points (which is sizable) between the two stocks’ yield.

    Hope that helps! 🙂

    Best regards.

  47. Brazo,

    I like HCP. But I like OHI better, which is why I’m a shareholder in Omega. I wouldn’t mind maybe adding another healthcare REIT to the mix, however, and HCP is one I’m considering. I just remember being a bit underwhelmed when I looked at it while back, and the recent tenant troubles probably doesn’t really light a fire underneath me.

    Cheers!

  48. Gremlin,

    Yeah, it’s really tough to find that kind of mix of yield and growth. That’s especially true when we’re talking about quality and sustainability, which WPC definitely seems to offer. Agreed that some REITs are a bit of a stretch here, which is why I was so glad to pick up WPC at a pretty solid value. Wouldn’t even mind adding more quite quickly. We’ll see how the funds look. 🙂

    Thanks for stopping by!

    Best wishes.

  49. Ravi,

    Right. That’s really the big appeal of REITs to me: I get the exposure to real estate (especially commercial) without any of the hard work. I get instantaneous access, scale, and liquidity without many of the headaches. I’m quite sure an individual investor could do better by going out and tackling real estate projects directly, but I like buying a few shares and collecting my check. I like easy. 🙂

    Now, if you have an interest in real estate, that’s one thing. But I don’t. So this works for me.

    Glad to be a fellow shareholder with you. WPC definitely sports some of the better fundamentals I’ve run across in this space. Reminds me a lot of OHI when I bought shares a while back. We’ll see how it goes!

    Cheers.

  50. AJ,

    Nice! I definitely wish I would have loaded up on WPC a while back. I don’t know how long-term shareholders can be anything but delighted. 🙂

    I don’t really follow SKT at all, so I have no opinion. Just not an area I have any personal interest in investing in.

    Best regards!

  51. AJ,

    Awesome. I’m thinking that WPC might end up being one of those “Wish I would have bought more back then” stocks. Might have to scrounge up some change. I have a few free trades with Scottrade, so maybe I should add just a few more shares here. We’ll see.

    Enjoy that boost to your income!

    Cheers.

  52. Nice analysis. I know you only buy stock but have you ever looke at debt? The reason I ask is that Jordon Goodman (the author and radio person) was talking about commercial mortgage bridge loans today that pay 6% per annum like a CD. He is pretty respected so I didn’t want to just disregard hia words , and as you know there are many ways to get yield. I would be interested to se if you have ever considered other investments to obtain yield Thanks and good luck.

  53. Hi DM,
    I see that WPC has P/E of 38? Dont you think that it is bit high? Or is it that while buying REITs you consider P/FFO and dont look at P/E? Could you please share some knowledge on what to look at when buying high yield REIT’s v/s regular stocks?

  54. wtd7576,

    “I know you only buy stock but have you ever looke at debt?”

    I have, but the rates and returns looking forward don’t really seem particularly appealing to me. There have been a number of studies performed that show stocks’ long-term returns have utterly destroyed that of fixed income over the last 100 or so years. It’s not even close really. So I don’t really see a need to expand my interest into debt right now, especially with rates where they are.

    You can read more here, if you’re interested:

    https://www.dividendmantra.com/2014/07/a-0-allocation-to-fixed-income/

    https://www.dividendmantra.com/2015/03/warren-buffett-on-volatility-and-risk/

    Jeremy Siegel did a study on real returns over the last 200 years (1801-2001). Consider that $1 in stocks would have turned into over $8 million. $1 in bonds would have turned into about $14,000. That’s assuming reinvesting everything and leaving it alone. In addition, bonds have lengthy periods of negative real returns. So I guess you have to really decide how you define risk and what’s attractive to you. I’ll continue to take my chances with stocks.

    Cheers!

  55. Abhi,

    You can read in the article:

    “In addition, because REITs like WPC consistently have rather significant depreciation and amortization charges that aren’t truly reflective of the company’s profitability, we’ll look at the growth of funds from operations (FFO adds depreciation and amortization back into earnings) on a per-share basis.”

    But here’s some further reading on the subject:

    http://www.investopedia.com/articles/04/112204.asp

    Hope that helps! 🙂

    Take care.

  56. Looks a really interesting investment. The REIT world in the US is very different to the UK. I hold one REIT but that is all I must say.

    18 years of growth and a yield that high is extremely attractive. I am not surprised at all that it caught your eye (and your cash!).

  57. DM,
    To add to my previous post I purchased 30 shares of RDS.B @ $60.50/share on 4/8 since I saw you owned a few shares as well. Can’t pass up a good deal. Didn’t know if you had any thoughts on the merger deal with BG, whom I’ve never heard of? Added ~$112 in dividends!

  58. Typically 7 years since the initiation, I think end of year will bring a major correction with 2 years of bear market, I’m also starting to see a lot of dividend paying stocks approaching high payout ratios so it will be interesting to see how it plays out in the downturn – nothing goes up forever, we are due for a major haircut

  59. Maybe I’m wrong, but the reason I don’t do too many REIT because the dividend from REIT is not qualified dividend. That means instead of getting taxed at 0 or 15% depending on your tax bracket, you get taxes at earning income tax rate. That could change the take-home amount dramatically.

    Any tax advisor out there can clear this up?

  60. TDD,

    Definitely tough to pass up 18 consecutive years of dividend raises, a very attractive yield, and a high dividend growth rate. My cash was just begging to be put to work, so there you go. 🙂

    Thanks for stopping by!

    Best wishes.

  61. Josh,

    Thanks! I think it’ll work. Even if growth slows, it should still provide plenty of growing income. 🙂

    Hope you’re able to put some capital to work as well!

    Take care.

  62. Josh,

    Shell paid a big premium for BG and the management team at Shell doesn’t have the best record in the industry for creating shareholder value or increasing its dividend for lengthy periods of time. Time will tell how this works out, but I’m okay with Shell being a rather small piece of the puzzle for me.

    Cheers!

  63. Markowich,

    I can only hope you’re right about that. I’d love to see a 10% or 20% correction from here. Nothing like a stock sale to get me excited, especially now that I don’t have as much capital to put to work as I used to. 🙂

    Cheers!

  64. Vivianne,

    As I mentioned in a previous comment, you’d have to be pumping out some serious dividend income for REITs to really cause tax headaches. The best thing to do might be to play around with some tax calculators and put together some various scenarios. I’ve found that unless you’re earning more than ~$43k in dividend income (assuming a single filer) and a good chunk of that is REIT dividends, you’re going to pay no or little tax.

    Here’s a nice calculator to play with:

    http://turbotax.intuit.com/tax-tools/calculators/taxcaster/

    Cheers!

  65. Hi Jeason,

    thanks for sharing your latest new purchase. Good luck with it!

    I purchased today Allianz SE, its a german insurance company which takes care about shareholders value. With this purchase I accomplished my 10.000,-€ milestone. A great feeling. It tooked my 1.5 years .The first step is always the hardest I guess.

    I closed my blog by the way since I am a frugalist I had to.

    All the best from Germany

    DK

  66. REITs could be very interesting and when you post this new buy I got my quarterly dividend on ARI. This is the only REIT I have at the moment but I´m thinking of buying more different REITs. I have WPC on my watchlist and I think, this is not a bad choose. What is really interesting about REITs at the moment is the high yield. If someone is starting investing in shares and REITs they should early buy one or two REITs with high yield to start getting some income. May be in the future I will start a position in WPC.

  67. I read this post and it makes total sense Jason! Thanks for bringing this to my attention.

    Best regards,

    Ray

  68. It’s just one buy after another with you 🙂

    I’m curious on what you think of LTC properties as a buy? They deal with long term/elder care facilities. They also pay a monthly dividend.

    Sincerely,
    ARB–Angry Retail Banker

  69. DK,

    Congrats on the milestone over there! 🙂

    An insurance company sounds great. Really one of my favorite business models of all. It’s a shame that I’m not as heavily invested in insurance as I’d like. That will absolutely change as time goes on.

    Sorry to hear the blog didn’t work out. It’s certainly not for everyone.

    Thanks so much for stopping by. Keep up the great work!

    Take care.

  70. olli,

    Yeah, not a bad idea to target high-yield stocks at the start to get things moving along. But only if the valuation makes sense and you’re still diversifying as you go. That’s something I wrote about a while ago – targeting different yields as you go. I didn’t necessarily do that myself, but I probably would have if I were to start all over again. That said, it’s hard to say I have any regrets. 🙂

    Cheers!

  71. ARB,

    Ha! I just love putting cash to work. I hate seeing it sit there, being all lazy and what not. 🙂

    LTC isn’t a dividend growth stock from what I can see. It’s not on the CCC list. Took a real quick look at it. The yield is nice, but the yield is a lot lower than WPC and so is the DGR. I’m guessing they must have kept the dividend static for a bit there. Either that or David missed this one?

    Cheers!

  72. Ryan,

    Absolutely. Occupancy rate is definitely important. Every vacancy is that much less cash flow. I looked through some of their older reports and it appears that they typically have a pretty high rate. Just not much to really dislike here. We’ll see how it goes. 🙂

    Best regards.

  73. I like WPC. It could produce a good current income that will likely grow at or above the rate of inflation. Even if interest rates go up to the “normal” levels we had in 2007, WPC would still do fine. I think it is a good solid long-term pick

  74. I just bought some PM and it went up quite sharply on way better than expected EPS growth. $1.16 vs $1.01. I had to check my accounts because I thought there was an error in the numbers! Hopefully the long-term holds out on PM.

    Thanks,
    WE

  75. DGI,

    Thanks for dropping by.

    I agree. Seems like just a solid long-term holding here. Wish I could have landed it even cheaper (I always do!), but I think the value here is pretty strong. If they can keep raising the dividend anywhere near their long-term rate, I’ll be a very, very happy shareholder. 🙂

    Best wishes!

  76. WE,

    Yeah, PM is one of my largest positions, so it’s hard not to notice that kind of move. 🙂

    Too many people focus on the short term, and that’s been especially noticeable with PM lately. Just one of those things. The market sometimes gives you a gift, and PM has definitely been such a gift lately. Actually, it still is for long-term investors.

    Cheers!

  77. Hi Jason. In regard to REITs I have a position in Prologis, which specializes in logistic all around the globe. You might be interested in taking a look at this great company. It’s a good way to have a foot inside e-commerce, since their customers are all involved into big distribution, transport and online retail (UPS, DHL, Amazon… to name a few).

    BTW. Just today I updated my watchlist.

  78. DD,

    Great! I’ll take a look. Always enjoy fresh ideas. 🙂

    Best of luck with it. Sounds like you picked up something pretty solid over there.

    Thanks for dropping by.

    Take care.

  79. The buys just keep coming! Awesome! Did you hide some money under the mattress and are bringing it out finally? You keep saying your capital is tight but you could have fulled me haha.

    Thanks for researching and picking this company. You’ve put it on my radar as I have been looking for a good company that pays in the Jan, Apr, July, Oct months. DE was my other pick right now, but the dividend growth, dividend yield and the pull back in this name might make it slightly more attractive.

    Keep up the great work!

    ADD

  80. ADD,

    Man, I wish there was some extra cash under the mattress. Maybe I’ll flip that thing over tonight and double check. 🙂

    Glad I could bring this one to your attention. I think it definitely merits some due diligence. A lot to like across the board, that’s for sure.

    Thanks for dropping by!

    Cheers.

  81. For once I can say that I beat you to the party. I bought WPC last fall and it appreciated pretty well since then, however it pulled back quite a bit the last few months. With dividends, I’m currently up over 6%. Good time for you to buy in at this point.

    Keep em coming.

  82. Tom,

    Glad to hear that. Looks like you got in at a great long-term value there. I don’t see anything here that indicates they won’t keep on rolling for us. Let’s enjoy the ride! 🙂

    Best regards.

  83. That is exactly how I feel! While my wife loves going to the mall to browse, I groan and moan. To me, that’s time to catch up on the DG blogs and shop for stocks! I wish I had more money, not for toys or vacations, but for ADMs, APPL’s, DEO’s, MMM’s and more! Glad to see I’m not alone in my sickness!

  84. Steve,

    You’re definitely not alone! And if that’s a sickness, then you can count me in as one that isn’t very excited about a cure. 🙂

    Keep up the fantastic shopping habits!

    Best regards.

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