Recent Buy

buyJune is quickly becoming my busiest month ever in regards to stock purchases. And I mean that both in terms of the sheer amount of capital deployed as well as the total number of transactions. I’m actually buying stocks quicker than I can write articles, so these articles will trail the actual transactions by a number of days. If you’re interested in knowing what I’m buying in almost real-time, you can follow me on Twitter.

For the second purchase this month I decided to target a REIT that I recently initiated a position in. The price continues to drop incrementally day by day (it’s down double digits YTD) and I think the stock continues to trade at an incredibly compelling value if you’re investing for the long term. Stock prices of course can go up, down, and all around over the short term, but incrementally better underlyingΒ results from the business will ultimately manifest itself into higher dividends and a higher share price over the long haul. Meanwhile, I’m absolutely thrilled to be able to buy more shares at an even cheaper price.

I purchased 15 shares of W.P. Carey Inc. (WPC) on 6/2/15 for $63.10 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.

Solid Q1 Results

When I analyze a company and make the decision to purchase stock, it’s my intention to hold that stock until I’m no longer roaming the planet. That means I’m a buy-and-hold investor to the nth degree – I plan on never selling a stock after I purchase it.

I initiated my position in WPC back in April after conducting a thorough analysis and valuation on the business. I was happy toΒ exchange cash that will slowly dwindle in value for equity in a high-quality REIT that’s growing at an attractive clip and paying out a very healthy yield in the meanwhile.

What’s changed over the last two months?

They announced fiscal yearΒ 2015 Q1 results, which were really solid. FY 2015 AFFO guidance was reaffirmed for $4.76 to $5.02 per share, revenue was up more than 25% YOY, and the company completed two investments totaling over $390 million – a portfolio of automotive retail facilitiesΒ located throughout the United Kingdom and a logistics facility in the Port of Rotterdam, Netherlands. AFFO was slightly down YOY, though the prior period wasn’t completely comparableΒ due to a stronger dollar and certain one-time items.

The high end of guidance would result in a bit over 4% annual growth in AFFO, so it’s quite possible dividend growth will lag its historical average in FY 2015.

Other than that, business as usual. But the stock fell about 6% in the interim. I’m extremely excited to be able to take advantage of short-term volatility and pick up shares in WPC 6% cheaper than before. I let value, not price, dictate my investment decisions. And I think WPC is worth just as much today as it was two months ago, which means a sale on shares is most welcome.

Additional Equity Issuance

OneΒ otherΒ thing that has changed since I initiated my purchase back in April – though occurring after this most recent buy in early June – is that WPC announced that it may sell up to $400 million in stock. This announcement was made public the very day after my purchase went through. As I’ve said before, if timing the market or press releases or anything else were necessary to achieve financial success and independence, I’d be working for the rest of my life.

While I wish I would have waited a day or two, this equity issuance isn’t a particular surprise. REITs routinely issue additional shares as their unique capital structure basically requires it in order to grow and acquire properties.

Per the press release, WPC announced the intentions of the new funds:

W. P. Carey Inc. intends to use the net proceeds from this offering to reduce indebtedness, which may include amounts outstanding under its unsecured revolving credit facility, to fund potential future acquisitions and for general corporate purposes.

I trust management will do the right thing and continue growing the business at an attractive rate. If I can’t trust them to manage $400 million, I can’t trust them to run a $6.4 billion company.

Risks

WPCΒ 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 13.28 after the recent drop in price and release of Q1 results. I find that incredibly appealing. The P/AFFO ratio for a REIT is similar to the P/E ratio one would use to quickly value any normal stock, so there’s a lot to like there. The stock now yields 6.03%, based on my purchase price.

I valued shares using a dividend discount model analysis with an 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.

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

Conclusion

I continue to really like WPC for reasons I laid out in my original analysis. As the stock price continues to drop, I like the stock more and more and will very likely continue to average down. The stock is now down about 2.5% from my most recent purchase, so it wouldn’t take much more of a drop for me to get interested in averaging down once more. Meanwhile, I’ve built up a pretty nice-sized position in a relatively short period of time.

The fundamentals are excellent, the most recent financial results were solid, and the company continues to fire on all cylinders.

This purchase adds $57.15 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 July to reflect this recent purchase.

Full Disclosure: Long WPC.

What do you think of WPC here? Like the stock even more after the recent price action?Β 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Similar Posts

105 Comments

  1. DM,

    I’d rather be busy doing what you’re doing than grinding away at my 9-5!

    Still being new to the dividend growth investing fever, it’s interesting to me that you can just hold onto a stock forever and sort of ride it to the top while receiving regular payments just for doing so.

    Amazing.

    FM

  2. I would love to add to my WPC, but I opted to average down JNJ today. You gave such great reviews recently on both. After a little more investigation JNJ was the better choice for me. I have 16 WPC and look forward to buying more down the road. I have been following you for 17 months. Haven’t lost any money. My first dividend was 10 cents February 2014. I was hooked! I made $1,122.80 for the year and this year I expect to receive $2,400 plus….Thanks Jason!!!!!

  3. you’re really bring up your average portfolio yield with all these REIT purchases!!

  4. REITs are the word! No doubt about that. I just published my recent buys today and added to my HCP and VTR. It looks like REITs will be quite popular among the dividend bloggers going forward. I think till the Fed raises rates there will be this uncertainty in the sector and better buying opportunities will follow. I am choosing to concentrate on the big three health REITs for now but I also like DLR, WPC, O, AVB and some smaller health plays NHI, OHI and LTC. Thanks for sharing and keep pumping that snowball.

  5. FI Monkey,

    I’m incredibly fortunate, but I’ve also worked incredibly hard to get here. A little luck and a lot of hard work can bring about amazing results. πŸ™‚

    Buying and holding forever puts you in a great spot to do much, much better than the majority of people out there attempting to outfox and outguess the market. Just keep on reinvesting the dividends, grow the snowball, and look out below.

    Best regards.

  6. cwalczaksd,

    Tough to not like WPC here. The valuation, yield, quality, and growth all check the boxes for me.

    Looking forward to having you as a fellow shareholder! πŸ™‚

    Best wishes.

  7. marcy,

    That’s fantastic! Congrats on the huge success. That’s an amazing jump from $0.10 early last year to expecting $2,400 this year. I’m guessing you’re putting away some serious capital. Keep it up! πŸ™‚

    Thanks for stopping by and sharing that. Keep in touch!

    Take care.

  8. Conrad,

    Yeah, the REIT purchases are helping to offset some of the stocks I’ve been picking up lately with lower yields. I’d like the portfolio to yield somewhere around 3.5% or so over the long term, so it’s just balancing that out as you go.

    Cheers!

  9. Awesome job with WPC here Jason, it’s such a fantastic company and I feel you’ll do very with it in the long run. Glad to see I’m in good company in June, because it’s shaping up to be a monster for me as well! I’ve already invested over 5K, which might be a personal record… I’ll have to go back and see if that’s true. Any idea what your monthly contribution record is? Either way, it’s time to beat it my friend! Hope all is well for you this week and I’m excited to read the next purchase posts πŸ™‚

  10. DH,

    Nice moves over there. Gotta love the value combined with the yield and growth. It’s just not often you can find that combination all working together in such beautiful unison. Love it when it happens, though. πŸ™‚

    I’m certainly hoping for more uncertainty and more volatility. Short-term volatility is generally a long-term opportunity, so bring it on!

    Best regards.

  11. Ryan,

    Wow, $5k? That’s awesome, man. So glad to hear it. You’re growing that portfolio over there at light speed. Awesome!! πŸ™‚

    I’m at about $3,300 thus far this month. I think I’ll probably finish at somewhere around that $5k mark as well… maybe a little over. I’m not sure what my all-time record is, but I doubt it’s over $5k net. Good question. Going back through my records real quick it looks like I invested about $7k back in 10/11, but that’s only because I received a rather large windfall when HGIC was acquired. I don’t see any other months that eclipsed $5k just from taking a quick look – other than when I first started with my seed capital. I’ve hit over $4k quit a few times, though. But I still have some cash to be invested this month and there’s still some pretty hefty dividend income rolling in a little later this month. So I’m hoping to finish really strong here.

    Keep it rolling over there. 2015 is turning out to be a blockbuster for you!

    Best regards.

  12. Hey Jason! Doesn’t the at-the-market-offering dilute our current stakes in WPC? I’m not really sure how I should feel about this. I mean the company will get extra 400 million to their bank accounts but if they can’t make as good use of it as they have before, us current shareholders will basicly just own less of the company. I would have expected such move if the stock was currently highly overpriced but as you pointed out I also believe the stock has great value for the dollar right now.

  13. I like WPC and may purchase some this week. However, don’t they have a small issue with managing non public REITS, which are becoming more regulated? Is this also pushing the price down along with the rate fears?

  14. Nice work, tough to go wrong at this price. For perspective, ValueLine projects a 2018-2020 price of between $75 – $110, with FFO of $5.50 & a P/FFO of 17.

  15. Jason,
    I have added to VTR this month, plus started positions in UNP and NSC. Hey, I got railroaded!

    Seriously, I could just have easily added to OHI or WPC as VTR. If prices stay down, or go down further, I will definitely be adding to the REITs.
    Best wishes,
    Keith

  16. Patrik,

    Right. That’s why I mentioned in the article that if you can’t trust them to manage $400 million, you shouldn’t trust them to run a $6.4 billion company. REITs routinely issue shares to fund growth, pay for acquisitions, or repay debt. You’ll notice that when I initially analyzed WPC, I included per-share growth rather than absolute growth to account for the issuance of shares. Realty Income Corp. is another great REIT, but you’ll notice their share count is up by more than 100% over the last decade.

    I think the bottom line is really that if you’re concerned about the issuance of shares or dilution, you shouldn’t be in REITs.

    Hope that helps!

    Best regards.

  17. WPC is still a solid company despite the share price declining. I added some WPC in May so I’m on board with this purchase. REITs have been taking a beating this year but thats great for long term investors. Solid buy yet again DM!

  18. scott,

    I’m not aware of any issues? Perhaps you could share what issues they’re having?

    W.P. Carey works with and has worked with non-traded REITs, but I’m not sure what issues you’re seeing. It’s not uncommon for publicly traded REITs to have some association with non-traded REITs.

    Cheers!

  19. Randall,

    That’s certainly in the realm of possibilities. The last 10 years have been quite kind to WPC shareholders, so I’m hoping the next 10 also look pretty strong. πŸ™‚

    Thanks for sharing that!

    Best wishes.

  20. KeithX,

    I know exactly how you feel. I’ve been trying to find enough capital for the building out of my UNP position while simultaneously picking up the REITs and the occasional outside opportunity as well. Can’t win them all, but that’s a great first world problem to have.

    You’re in a great position to even still be investing even though you’re retired now. Being able to continue reinvesting excess income even without the regular paycheck is a pretty awesome spot to be in. πŸ™‚

    Cheers!

  21. JC,

    I’m loving the beating they’re taking. I’m ready to grab a stick and join in. Anything to drive those share prices down! πŸ™‚

    Thanks for stopping by. Hope all is well with the family.

    Best regards.

  22. cwalczaksd,

    Thanks for sharing!

    I read the whole article but didn’t really learn anything new. No offense to Brad, but it’s just really an analysis of WPC’s business model with some speculation regarding a percentage of the business there at the end. No spin-off for right now, so it’s just noise until then. I don’t actually see any problems with the investment side of the business, which is what I was referencing earlier. Maybe new regulations make it more difficult to conduct business, maybe not. Regulations change all the time in every industry. I’m sure WPC will figure out the right course of action if/when the time comes. That’s why they’re running a $6.4 billion company. πŸ™‚

    Cheers!

  23. I agree with you. I was more posting for Scott’s benefit if he was curious to learn more about that side of WPC’s business. Investment management is less than 20% of WPC’s overall business so a few extra regulations are probably much ado about nothing, and this management team definitely knows what it’s doing.

  24. cwalczaksd,

    Gotcha. I appreciate you doing that and sharing the perspective.

    Agreed. If adverse changes come about, we’ll know about it and management will respond. πŸ™‚

    Best regards.

  25. Hi Jason,

    You sure are pulling lots of buys lately. That’s awesome. We’re trying to do the same as well. πŸ™‚

  26. Tawcan,

    Doing all I can to keep this snowball rolling. I’ve unloaded the BB gun a bit this month. Trying to quickly reload on the fly. πŸ™‚

    Thanks for stopping in!

    Best wishes.

  27. I am a fan of WPC. Have a bit of it in my Robinhood account. Right now it is kind of beat up but I think the chart is showing a bottom forming.

  28. Dividend Mantra,
    Nice purchase…I also purchased 15 shares today of JNJ. Its a great time to be buying stocks this week. Keep up the great investing and keep that snowball moving. Keep in touch friend.
    LOMD

  29. Well done Jason, Keep building your freedom fund income with a good REIT stock like WPC and you should do well. I am looking to add to my REIT, ventas (VTR). Love the income these companies provide. keep up the good work Jason.

  30. I have a full position in WPC. I had to average it up recently. I am investing heavily from last two weeks to all the corrected stocks you mentioned in your previous article. I have no capital left to invest. I am 100% invested in Real estate apartments and Stocks. First time after long time I decided to sell two stocks to build capital. I had to sell BAC and JPM that were up 250% and 150% up since my purchase. My yield on cost was 4% and 6% but my current yield on those stocks were like 1% and 2.5% so I decided to sell them to raise capital to buy some bargains. Plus I am not a big fan of financial stocks. I hope market keep going down for next few weeks so it allows me to build capital to buy more bargains in Consumer Staples and REITS.

  31. edlerp,

    Glad to be a fellow shareholder with you. πŸ™‚

    We’ll see how it goes from here. Definitely wouldn’t mind seeing it break below $60 to get one more good crack at it.

    Thanks for stopping by!

    Cheers.

  32. LOMD,

    Nice move there with JNJ. It’s almost never a bad time to pick up shares in that wonderful company. Glad to be a fellow owner with you!

    Best regards.

  33. michael,

    Thanks for the support. Much appreciated!

    Hope you get the price you’re looking for there with VTR. Gotta love being able to trade dollars that slowly lose value for equity that slowly gains value and throws off cash flow in the meanwhile.

    Best wishes!

  34. AJ,

    Nothing wrong with that. If you think there’s better value elsewhere, then it probably makes sense to maneuver there and raise some capital in short order. I generally prefer just holding on to what I have and buying around positions that I don’t currently find attractive or find myself overweight in, but that’s just me. In the end, if you’re moving in the right direction (increasing your wealth and income), then that’s what matters.

    Glad those two stocks worked out so well for you, though. I remember looking at BAC around $7/share, but I just couldn’t really make the numbers work out. Nonetheless, I would have made some good money there.

    Keep it up!

    Best wishes.

  35. Bought WPC a couple of days ago. It does look nice. It was that or OHI. I picked the diversity but wish I had more money to buy both.

  36. Great post. This is kind of unrelated, but what do you think of MLPs or stocks like OAK that pay high yields but require the filing of K1s (instead of 1099s) come tax season? Thank you for all of your insight.

  37. Pygmycoho1,

    I totally hear you. Really just a flip of the coin for me at this point. But I also like WPC’s diversification quite a bit. Could have gone either way for me, though. Based on recent price action, I wish I would have went with OHI near the low and then averaged my way into WPC a bit later… but you really can’t time that stuff. I’ll never even remember how it went down 10 years from now. Hell, I won’t remember just one year from now.

    Thanks for stopping by!

    Best regards.

  38. DS,

    I do my own taxes, so that perhaps biases me. But I decided long ago that I didn’t want to really deal with the K-1s. Some will tell you they’re no big deal. Some will tell you they’re a nightmare. I took a good look at the situation and concluded it wasn’t for me. You’ll really have to make that call for yourself, though.

    That said, I generally prefer the general partners anyhow due to the higher growth rates (due to IDRs) and better long-term total returns. That’s why I own KMI and OKE. Although KMI consolidated, the general partner usually offers the more compelling long-term case, when available.

    Hope that helps!

    Best regards.

  39. HI DM

    You just keep adding and adding! πŸ™‚ The machine is unstopable! I clearly see the power of dividend compounding, cashflow is the king. You are always ready to buy on the dips!

    Take care
    Dividend Freedom

  40. Hello DM

    Nice purchase. Was considering entering the position but could not stomach:

    (i) the intangibles on the balance sheet which amount to $20 per share — technically these may be written off any time, eating badly into the stock price.

    (ii) Over the last 10 years, debt has been increasing at an unsustainable pace. I guess the debt was used (more) to finance dividends rather grow the business. I see this as signal for bad management.

    (iii) Payouts exceeding dividends. Combined with point (ii) above, and the fact that interest are more likely than not to be higher over the next 10 years, than in the past 10, I see a dividend cut sometime in the not too distant future. This alone could eat $10 into the stock.

    (iii) WPC has also consistently generated increasingly negative cash flow over the past 3 years. Not sure when the cash bleed will stop. From the cash flow statement, they would have to cut their capex. Not a good sighn as this would stall growth.

    Considering those headwinds, I would imagine the stock trading around $30 within 3 years or so, especially if the Fed consistently raises rates to tackle inflation, given that unemployment rate is already at 5%. Don’t you think there is a better entry point, and this recent decline might be the start of a big correction?

  41. Respectfully, your discount rate is too low. You can interpolate the approximate required return on equity by using DDM to solve for Re given Div0, Vo, and g. I ran the #s and came up with 11.71%, not 8%.

    Given the above, I get fair value of $49.88.

  42. Iv just had a lot of lovely dividends land in my account this week.So i managed to re-invest them all today in BHP Billiton (Lon:BLT).A low four figure sum bought just from dividends from other blue chips.).I already had Anglo American,but decided BHP was as good a home as any for that free money.Dividends next year from a fantastic company bought with dividends from other great companies.Whats not to like?

  43. It’s always good news when your buying activity increases so much that you’re behind writing on them πŸ™‚

    This is a great write-up after your previous article about the market being “expensive.” This shows there are always bargains to be found, you just need to do some digging!

  44. Jason,

    Very nice. That is a solid chunk of future income that you can count on. If the option was open to me right now, I’d add WPC or similar REIT to my Roth. That long term growth and outlook is just outstanding.

    Enjoy the income,
    Gremlin

  45. Full steam ahead! That’s the way to go. Those dividends are not going to pile up by themselves. Or actually they are…but still a little push here and there doesn’t hurt:)

  46. I dipped in toe into WPC this week as well. I had been on the fence, and still have not done as much due diligence as I like, but sometimes getting that toe in provides the last little push. If I continues to like it, I’ll build the position up over time. I’ve love to see them become the next Realty Income.

    They do differ from O which has a very well defined core competency – long term triple-net leases for US retail. However, O has become so big that they may no longer be the killer reit they have been. Sure they’ll be solid, but if I could go back 15 years I’d have 10% of my portfolio in O.

    WPC is global and spread among several business sectors. This is a dual edged sword. Managing it well could give them a really long runway. However, being so diverse brings more opportunity to -di-worsify. They won’t be the the retail lease king here or any where else, or the health king, or the industrial king. Their leases range from short to moderate to long term. Again this can be good and bad. It’s a lot to manage. Do that well, then great.

    And, of course, there’s that investment branch.

    Still the promise is there. So dip my toe I will. I bought 15 shares. That’s less than .20% of my portfolio, but it can still pay for a cheap date night for my wife and I (chipotle every 3 months for life!).

  47. DF,

    I’m doing all I can over here. Financial independence isn’t going to achieve itself, right? πŸ™‚

    Thanks for dropping by. Let’s stay aggressive!

    Cheers.

  48. BumbleBEE,

    You might be unfamiliar with how to analyze/evaluate REITs. REITs have a unique capital structure in that they have to send out 90% of their net income in the form of dividends to shareholders. So there isn’t really any retained earnings there, which is why you see increasing debt and share counts over long stretches of time.

    I’m not seeing increasingly negative free cash flow over the last three years, but it’s also not uncommon to see negative FCF for REITs.

    I’d recommend reading a bit more into how to evaluate profitability, payout ratios, and debt when it comes to REITs. This link will get you started:

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

    Hope that helps! πŸ™‚

    Cheers.

  49. Dan,

    The discount rate is the rate of return you’re looking for. Respectfully, you can’t really say someone’s discount rate is too low or too high… it’s the rate of return they’re looking for, which might be different from you.

    I usually use a 10% discount rate for most stocks (slightly higher than the long-term rate of return for the broader market), but I back that off a bit due to my preference for cash flow now. So higher-yielding stocks are generally worth more for me, and I’m willing to sacrifice a bit of total return there in order to get that income now. The time value of money and all that.

    That said, you can play with the numbers however you want. Keep in mind that the DGR I used is woefully short of their long-term average. So you could just as easily use a 10% discount rate and a 6% long-term dividend growth rate and arrive at the same value. Or you could use a 10% discount rate and keep everything else the same, which shows that the stock is roughly 10% undervalued.

    Take care!

  50. John,

    BHP Billiton has definitely been beat up over the last year or so. I can’t imagine they stay this low forever – they’re the best at what they do. Commodities fluctuate, so there’s a lot of volatility there. As long as you’re okay with that, you should do well over a long period of time. Meanwhile, they’re still committed to that monster dividend. Enjoy! πŸ™‚

    Cheers.

  51. RTR,

    Absolutely. I wish I could be in such a situation every month. Buying faster than one can write articles about is a great situation to be in. πŸ™‚

    Indeed. I think there’s value here and there. To assume that all stocks trade in lockstep with one another is ignoring logic and facts. Just doesn’t work like that. Ultimately, value is everything. The stock market can ignore that, even for a long period of time, and price merchandise at whatever price it wants. But, like Buffett says, value eventually matters.

    Thanks for stopping in!

    Cheers.

  52. Gremlin,

    I don’t want to go too crazy on REITs here because I ultimately see about 10% of my portfolio earmarked for them, and there could very well be more irrational behavior yet ahead. But I see some value and I have some cash, so I’m pulling the trigger. πŸ™‚

    We’ll see how it goes. But I’m glad to own a small slice of real buildings across a variety of industries across the world.

    Best wishes!

  53. DL,

    Ha! Yep. Exactly. They eventually start to pile up by themselves, but you have to get that snowball rolling at a good velocity first. I’m still pushing with all I’ve got. πŸ™‚

    Let’s keep it up!

    Cheers.

  54. Mr. Enbhumbao,

    Thanks so much. Doing all I can to stay aggressive and build that cash flow. More cash flow means more replenishing ammo for the BB gun if/when we get that next big correction. πŸ™‚

    Best regards.

  55. IB,

    Right. There are pros and cons to that diversification. You have many more opportunities, but you also have opportunities to stray too far from what you know and find poor returns as a result. I think WPC’s long-term track record regarding their portfolio and growth is really solid, so I give them the benefit of the doubt. In addition, what’s so great about the stock market is that you can own those more concentrated firms (like an O) alongside the more diversified REITs (both in terms of industry and geography) like WPC. That’s what I do. πŸ™‚

    Glad to be a fellow shareholder. I think WPC will serve us well over the next 10 or 20 years.

    Best regards!

  56. Jason, how much commission do you pay when you buy/sell? I found the numbers at my broker’s ($8 per transaction) to be prohibitive unless I purchase massive amounts of a given stock.

  57. Stockbeard,

    I paid $4.95 for this transaction through my brokerage, TradeKing. I generally try to make sure the commission fees are no more than 0.5% of the total transaction. $8 isn’t that bad, and is in line with what I was paying with Scottrade. In that case, I’d try to make sure transactions are $1,600 a pop. Scottrade, who I still use, charges $7 per transaction. So I generally tried to average $1,400 or so per transaction when possible.

    Hope that helps!

    Cheers.

  58. I am hopeful for more dips DM. I see the railroads I like firmly below $100 (UNP & NSC), REITs like WPC and OHI are getting punished too. Too bad I don’t have unlimited amount of cash to buy more :-(.

    No matter what happens with the stock prices, the cash dividend we will receive every month will serve as positive reinforcement year after year.

  59. Jason,

    I love the REITs right now as well. It seems like every time rates start to go up everyone over reacts and all hell breaks loose. This feels very similar to late 2013 when most REITs including HCP and DLR took it on the chin. Great job on adding to a solid company with a fantastic yield!

    MDP

  60. DGI,

    I’m with you. I’m very hopeful for more dips. Today, for instance, is a real bummer. Waking up to see the market up by well over 1% isn’t real great when you’re planning on spending cash.

    But the rising dividend income serves as self-replenishing ammo for those hunting trips on the dips. We’ll see how it goes!

    Best wishes.

  61. MDP,

    The more noise, speculation, and fear, the better it is for a long-term investor actively accumulating assets. πŸ™‚

    Those who fear rising rates seem to forget these are real buildings with real tenants that pay real rent. Someone’s going to own those buildings. May as well be WPC. And it may as well be us collecting that increasing dividend income.

    Thanks for dropping by!

    Best regards.

  62. You’re very active this month, which is good.

    What’s your opinion on Reality Income at these prices? They’ve come down a lot recently.

    Keep up the good work. I’m about halfway through your ebook right now. Lovin’ it.

    Sincerely,
    ARB–Angry Retail Banker

  63. ARB,

    Thanks so much. Glad you’re enjoying it. I tried to put something cohesive and evergreen together. We’ll see if it stands the test of time. πŸ™‚

    Realty Income is really one of my favorite stocks. Wish I would have bought more in the $30s. It’s trading hands for a P/AFFO ratio of around 17.5. So that’s quite a bit higher than a lot of other high-quality REITs. I think its quality and track record deserve some kind of premium, but I’m not sure about that much. In addition, because of that premium, the yield is a lot lower. I just think better opportunities exist in the REIT space right now.

    Thanks again!

    Best regards.

  64. What is the spinoff from Billiton called south 32 I cant find much info on it and it does not seem to pay a dividend which makes me want to sell it to buy some more dividends

  65. Jason, have you discussed qualified dividends much in your blog? I only recently re-discovered them as a nice tax hedge after years of treating them as a nuisance on my 1040 tax forms. I am in the process of selecting stocks and ETFs that pay qualified dividends only. For my tax bracket, the dividends will have a 0% tax rate.

  66. Mark,

    Absolutely. The favorable taxation is one of the best things about living off of dividend income. πŸ™‚

    I’ve discussed it many times, though not in a while. I try not to repeat myself. I don’t want to bore you or myself. But I most prominently discussed that here:

    https://www.dividendmantra.com/2013/08/why-i-hold-100-of-my-equity-investments/

    I expect to pay very little or no taxes at all once I’m living off of my dividend income, but it’ll also depend on how much active income I’m earning. However, I don’t think one has to pick qualified dividends only. Even REIT dividend income will mean very little or no taxes at all, depending on the income relative to your overall income as well as your tax bracket.

    For instance, I just ran TurboTax’s TaxCaster and used input of $18k in qualified dividend income and $2k in non-qualified dividend income and the tax bill was still $0. I don’t think taxes will be a big problem for anyone seeking out financial independence by living off of dividend income. And if it is, it’s because you’re earning a ton of income. As always, I’d rather have a tax problem than a revenue problem.

    Cheers!

  67. Did BBL take out ADR fees for you guys? Is that normal, or is it a result of a spinoff from an ADR? I got hit with the fee a month or two after they paid the dividend, so I don’t think it was that.

    Sincerely,
    ARB–Angry Retail Banker

  68. ARB,

    It looks like that was a reorg fee, from what I can tell. $0.05 per BBL share for me. I’ve seen that before when there’s a major reorganization. I don’t think the $5 will make or break me. But if you’re looking for more information, I’d call your brokerage and/or BBL’s shareholder information line.

    Best wishes.

  69. Wow, I just ran TaxCaster for various amounts of a purely qualified dividend income. Zero federal taxes until about $48,000. Gives a nice incentive to obtain income via dividends. Somehow, seems too much of a free lunch a bit, but I assume the government probably doesn’t think many people will be living large based on it otherwise why allow such a nice tax break?

  70. Mark,

    Right. Qualified dividends are taxed at 0% as long as you’re within the 15% tax bracket. The 15% tax bracket extends up to $37,450 for a single filer. Add in the standard deduction of $6,300 and a personal exemption of $4,000 and you’re up to $47,750 for 2015. Makes it a very attractive way to earn a living. πŸ™‚

    This could change at some point in the future, but if your income is overall quite low, you’ll still probably always pay little in taxes. Just one reason I find getting by on relatively little a great way to live.

    Edit to add: That’s just in regards to federal income taxes. State income taxes will obviously vary.

    Best regards.

  71. DM,

    I admire your aggressive buys over the past couple weeks. Hopefully your book sales are adding extra juice to the capital machine. I also like how you’re mixing low and medium-yield stocks, a balance I’ve been focusing on more of late. If I buy a 5-6% yield stock like a REIT, I want to balance that out with a 1.5-3% yield stock.

    I believe you own Target as well so for you and all the other TGT shareholders out there, congrats on today’s raise!

    Best,
    DWC

  72. Interesting choice to go for an international REIT to diversify your portfolio. Do you see that there might be some extra reward for the extra risk on the lower % of ‘investment grade’ holdings, are you hoping that the sizable chunk of upcoming expiring leases will be filled with higher grade tenants?

    Cheers to more REITs πŸ™‚

  73. DWC,

    Thanks for dropping by!

    I’m definitely trying my best to stay aggressive. June might set a new high mark for me. We’ll see. I need less days like Wednesday, though!

    TGT’s most recent dividend raise was great, especially in light that it comes on top of that monster raise last year. All in all, good things.

    Hope all is well over there. πŸ™‚

    Best regards.

  74. DW,

    Yeah, I think the extra potential reward is already kind of baked in. You can compare it to O, which is a domestic triple net lease REIT that focuses mostly on retail. But there’s a large difference between the two in terms of valuation, yield, and growth. WPC offers superior numbers across the board there, which I think probably goes a long way toward explaining why WPC has returned so much more over the last decade. But we’ll see how it goes. πŸ™‚

    Cheers!

  75. I am staying away from REITs (non US-Investor). I picked up some HSY and KO today. PG + JNJ also look quite interesting at these levels. Let`s see what Mr. Market will present us with over the Summer months.

  76. Interesting analysis. I don’t know that much about this company, but when doing some research I found that analyst sentiment is very bearish, with several “sell” ratings. Any thoughts about why the negative sentiment on this stock? Yield looks very enticing.

  77. I myself bought WPC at $64 and like for the long term. I am hesitant to average down right now as I am a little nervous about their holdings in Europe. I just don’t like the economic/political situation there in the short and medium term. Just my thoughts but I would rather have company that is more concentrated in U.S.

  78. I see a very small pop in the stock price of WPC on June 10th. I’m guessing this article was posted after markets closed on the 9th? Jason, do you think you have a following who are attempting to mimic your trades?

  79. Juanito,

    Sounds like some solid moves over there. HSY is one I’m strongly looking at after recently writing about the stock. The pullback this year has provided for one of the better entry points over the last few years. Gotta love the brands and I see few immediate headwinds other than perhaps switching to all-natural ingredients.

    Thanks for dropping by!

    Best regards.

  80. JayP,

    Hmm, I have no idea. I really only look at Morningstar and S&P Capital IQ. I find their analyses to be pretty solid, with Morningstar really offering the most complete fundamental and qualitative picture. Just knowing someone throws up a sell rating without understanding why doesn’t give a lot of information. I’d check into the analyses and see what they have to say about that.

    Cheers!

  81. wtd7576,

    We’ll see how it goes. I’m not really concerned about Europe over the long haul. Millions of people living there and they all need business to go on as usual, regardless of political/financial situations. And that’ll be true 10, 20, and 50 years from now. When everything is cheery, that’s when you’ll pay the most. That said, I wouldn’t mind at all if WPC (and other stocks like it) dropped another 10% or 15%. I’ll keep my fingers crossed. πŸ™‚

    Best wishes!

  82. Tim,

    I honestly doubt this blog has anything to do with that. The whole market was up rather significantly yesterday. WPC’s daily volume is into the hundreds of thousands of shares. Unless there are some big players reading this blog buying up 20,000 or 30,000 shares at a time, my article had nothing to do with that. It’d be crazy if I had that kind of sway, however! πŸ™‚

    Best regards.

  83. Supposedly the free cash flow does not fully pay the dividend, meaning it is not self funding and therefore questions the sustainability of the dividend longer term.

  84. JayP,

    That line of thinking would eliminate a lot of REITs from consideration. As I mentioned earlier, the best way to look at profitability and dividend coverage for a REIT is through FFO/AFFO. Just quickly looking at the last fiscal year (using Morningstar) for the four REITs in my portfolio, it looks like O and DLR both had negative FCF. WPC and OHI had positive FCF. But most of them routinely register negative FCF. I don’t think DLR has registered positive FCF at all in the last ten fiscal years. But comparing FCF for a, say, Pepsi to FCF for a WPC isn’t apples to apples.

    Cheers!

  85. Jason u’re doing great! Big fan of you! You are the real life example of how someone can get FI within just a few years. The flow is getting better and better πŸ˜‰
    You opened my eyes and got me thinking a while back.
    Not every reader posts in the articles is what im thinking.
    How many unique visitors do you have as daily avg?

    Wish you all the best

  86. DDT,

    Thanks so much. I’m doing all I can to prove this is indeed possible. I’m ahead of pace, which I think shows the power of hard work as well as the robust nature of this strategy.

    Glad your eyes have been opened. I understand you lost some money with trading recently. Like I mentioned before, better now while you’re young. Keep buying high-quality companies that pay and grow dividends and I’m confident that you’ll see success.

    As far as traffic goes, check out the latest post for some figures. πŸ™‚

    Thanks for the support. I hope you’re rocking out over there!

    Best wishes.

  87. Hi DM,

    Seems like a nice buy there with an awesome yield! Do they have a legal pay-out ratio? Belgian REIT’s ( we call them GCC’s) have to pay out at least 80%.

    I might look into this REIT’s so I have a bit more exposure to real estate across the globe.

    Lock an load that BB gun πŸ™‚

    Cheers,
    G

  88. Geblin,

    Definitely loving the yield that some of the REITs are sporting right now, especially after the lower yields we’ve been seeing during a period of overvaluation there. They’ve come in nicely.

    REITs here in the US have to pay out at least 90% of their net income in the form of dividends, so that’s why they have those big yields. Not all are high-quality businesses, however, just like anything else. Have to separate the wheat from the chaff. But I do think WPC is one of the better and higher-quality options.

    I’ve been unloading the BB gun this month. At least three more articles to come. πŸ™‚

    Thanks for dropping by!

    Best regards.

  89. I love your blog. I finally bought MO this month. It fell enough for me to jump on board. Next is either Verizon or Coke for me. If they fall enough. Thanks for all you do.

  90. Trish,

    Thank you for the kind words. So glad you’re enjoying the blog thus far. I pour my heart and soul into the content, so it means a lot to me that it resonates with you.

    Best of luck as you start down this path. Don’t let Mr. Market bully you around, though. Let volatility be your opportunity.

    Take care!

  91. I have just learned about the WPC announcement from your post and am happy to know the risks involved as well, so that i know what to do when the time comes.

  92. WPC announced 57th consecutive quartely increase from 0,9525$ to 0,9540$ payable July 15.

    With a current yield of 6,2% I do strongly consider to add some more WPC shares before ex-dividend June 30.

    All thanks to JasonΒ΄s blog as I would have never ever found this nugget.

  93. Thor,

    Glad you’re enjoying your investment in WPC thus far. I think we’ll be pretty happy here over the next few decades. πŸ™‚

    Cheers!

  94. Jason,
    Not sure if you monitor all of the posts or just the recent ones. Anyway, we added enough WPC in the last month to move it into 7th place in the portfolio. WPC also provides the most in dividend income. This is where reinvesting dividends makes an impact. If WPC keeps yielding 6%, the number of shares will go up 33% in the next 5 years. Nice.
    Best wishes,
    Keith

  95. Keith,

    Nice move there. I hope we see WPC down into the mid-$50s at some point here in the near future. I have some room for another tranche. But I also think it’s not a bad idea to become pretty aggressive right where it’s at. Unless the company somehow implodes (like ARCP), there’s a ton of potential here. WPC has quickly become a large payer for my portfolio as well. I’m not unhappy about that. πŸ™‚

    Glad to be a fellow shareholder with you. Let’s hope WPC continues to do what they do best!

    Cheers.

Leave a Reply