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W.P. Carey Inc. REIT (WPC): Big Dividend, Big Risks

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If you like big dividends and discounted prices, W.P. Carey Inc. REIT (NYSE:WPC) may have caught your eye. It currently offers a 6.4% dividend yield, and its shares are trading nearly 16% lower than just 2 months ago. A cursory review of this REIT looks promising because of its big growing dividend, healthy dividend coverage ratio, and positive AFFO outlook.
REIT Stocks Northstar Realty Finance NRF

g0d4ather / shutterstock.com

However, we believe there are some very big, yet less apparent, risk exposures that should be considered before investing such as the upcoming wall of debt maturities, the persistent drag and risks of its foreign currency hedging program, and the obvious conflicts of interest in its growing managed REITs program.

About W.P. Carey

W.P. Carey is a diversified real estate investment trust (REIT) that owns primarily net-leased commercial real estate (net leased means the tenant, not the owner, pays the property expenses). In addition to its owned properties, WPC also manages a series of non-traded publicly registered investment programs. For perspective, in 2015 WPC’s real estate revenues were $735.4 million and its managed program revenues were $202.9 million. For further perspective, WPC’s owned real estate is well-diversified as shown in the following graphics.

Also worth considering, WPC’s share price has sold off nearly 16% in the last two months as it was caught up in the recent REIT selloff (i.e. until the last two months, REITs in general had been performing exceptionally well driven largely by income investors search for yield).

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