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W.P. Carey (NYSE: WPC) has quietly established an elite record of increasing its dividend. The REIT has given its investors a raise every year since its public market listing in 1998. Even better, it has increased the payout every single quarter since 2001.

The diversified REIT most recently nudged its quarterly dividend payment up to $1.071 per share ($4.28 annually), giving it a 6.7% dividend yield at the current share price. That unstoppable growth seems likely to continue. It makes W.P. Carey a great stock to buy this fall for dividend income that could last a lifetime.

Built to pay dividends

W.P. Carey owns a large, well-diversified, income-producing commercial real estate portfolio. It currently has 1,475 single-tenant industrial, warehouse, retail, office, self-storage, and other properties secured by net leases. These properties are operationally critical to its tenants. It also has 85 self-storage properties that it operates.

The REIT’s net lease portfolio generates very stable rental income because tenants cover three big inflation-driven costs (maintenance, building insurance, and real estate taxes). W.P. Carey pays out a reasonable portion of its stable cash flow in dividends. The company’s dividend payout ratio will be around 80% of its adjusted funds from operations (FFO) of $5.32-$5.38 per share this year. That allows it to retain a decent amount of its cash flow to fund new investments.

W.P. Carey’s financial foundation also features a strong investment-grade balance sheet. The REIT has earned bond rating upgrades from two credit rating agencies over the past year, increasing its rating to Baa1/BBB+. The higher ratings allow it to borrow money at lower rates, a competitive advantage in the current environment. W.P. Carey’s strong balance sheet features a low leverage ratio and primarily long-term, fixed-rate debt with well-staggered maturities. That helps mute some of the impact of higher rates while giving it lots of financial flexibility.

Built for growth

W.P. Carey’s net leases feature built-in rental growth. The majority of its leases contain annual rental rate escalation clauses tied to inflation, with most of the rest escalating at a fixed rate. With inflation still elevated, rents are growing faster than in previous years. That drove same-store rent growth of more than 4% in the most recent quarter, compared with less than 1.8% in 2020 and 2021. The company expects elevated rent growth to continue, driven by inflationary increases and higher fixed-rate rent growth on recent acquisitions and lease renewals.

Acquisitions are W.P. Carey’s other growth driver. The REIT has a long history of growing its portfolio through sale-leaseback transactions and build-to-suit developments. The company has closed over $1 billion of investments through the first half of this year. It anticipates completing $1.8 billion to $2.3 billion by year’s end.

The most notable deal was a $468 million sale-leaseback transaction to acquire four pharmaceutical R&D and manufacturing complexes from Canada’s largest generic-drug maker. The company signed a 20-year lease with a fixed annual lease escalation of 3%. That will provide the REIT with a growing stream of rental income.

W.P. Carey’s dual growth drivers should steadily increase its adjusted FFO per share. That should allow the REIT to continue growing its attractive dividend.

An elite income stock

W.P. Carey built a high-quality real estate portfolio. It supplies the company with steadily growing rental income, which, along with acquisitions, allows the REIT to routinely increase its dividend. Add in its strong financial foundation, and W.P. Carey looks like a great dividend stock to buy for those seeking a lifetime of passive income.

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Matthew DiLallo has positions in W.P. Carey. The Motley Fool recommends W.P. Carey. The Motley Fool has a disclosure policy.

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