Summary
Dividend investing is less popular than other forms but offers massive benefits.
Dividend investors often have to pick between high yield or high dividend growth.
Today, we look at two picks that are doing both. A win-win for income investors.
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Life can often be a series of choices. We are frequently forced to pick one thing over another.
So we weigh the odds, evaluate the outcomes, and try to decide which path to travel. Every decision is a temporary fork in the road. This type of experience is so universal that the great poet Robert Frost famously penned these lines in his poem “The Road Not Taken”: Two roads diverged in a wood, and I – I took the one less traveled by, And that has made all the difference . If you have never read the full poem, I encourage you to do so.
When it comes to investing in the market, the road less traveled is often approaching the market looking for dividends and income. Trading, growth investing, and options trading all have large, loud followings. We hear from them in the comment section of every article. They can’t help but express their views when they see ours written out.
Yet, the road less traveled has benefitted thousands of High Dividend Opportunities members and countless others who invest for income and dividends.
When it comes to dividend investing, we often must weigh an investment that offers a high yield now vs. an investment that is lower yielding and promises dividend growth. There is a whole branch of “dividend growth” investors who will settle for 1-3% yields in companies that have good track records of dividend raises. Many investors believe they need to choose to go down the high-yield fork or the dividend growth fork in the road.
Today though, we want to present two excellent choices that offer both a high yield and dividend growth. We don’t have to choose one fork or the other. We can have both! Let’s dive in: Pick #1: WPC – Yield 5.4%
W. P. Carey Inc. ( WPC ) is a “triple-net” property REIT with a diversified portfolio in industrial, office, and retail properties. WPC reported AFFO of $1.24/share for Q3 and maintained guidance for AFFO of $4.94-$5.02. 2021 has been a year of heavy investment for WPC, which is on pace to achieve $1.5-$2.0 billion in acquisitions.
This is setting WPC up to be a huge winner in 2022. Real estate is not a fast-moving business. It takes time to get properties under contract, it takes longer to close the deal and take possession of the property, and even longer to get the first rent check. So when a REIT like WPC raises capital, the new shares are included in the share count right away and start impacting per/share metrics, and interest on bonds starts accumulating right away. In other words, the costs are reflected immediately, while the reward of new rent coming in takes time. Investors who keep their perspective on the pace of real estate can get ahead of the curve and buy while the investment is still cheap.
For example, right now, WPC is trading at only 15.5x 2021 AFFO. For 2022, WPC’s AFFO can be expected to grow thanks to all of their investments in 2021, reduced interest expense, and rent growth.
Same-Store rent growth is huge for triple-net REITs like WPC. The reason is that they have very fixed costs that are not impacted by inflation, with interest being the largest one. So when rent goes up, that is extra profits. Here is a look at WPC’s base rent growth in recent years: – Source: WPC Q3 2021 presentation
At current CPI levels, rent growth in 2022 could top 2.5%. If CPI continues to climb or remain higher for longer, rent could go even higher. This will be a level of rent growth that WPC has not seen in many years.
WPC has set a trend of raising its dividend every single quarter since 2001. We expect WPC to continue this trend, and as AFFO increases thanks to WPC’s acquisitions and rent growth, the size of the monthly dividend raises will increase as well.
2021 has been a transformative year for WPC, and the investments it has made this year will pay dividends for years to come! This is a REIT […]
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