If You Invested $10,000 In This High Yielding Stock 10 Years Ago, Here’s How Much You Would Have Today

Real estate investment trusts (REITs) such as WP Carey (WPC 0.57%) appeal primarily to dividend investors – in this case, with the stock’s generous 5% dividend yield. It is well above S&P500the 1.4% average return of and the 2.9% return of the average REIT, using the Vanguard Real Estate Index ETF (VNQ 1.09%) as agent.

But growth-minded investors shouldn’t ignore high-yielding REITs, which becomes very clear when you look at WP Carey’s total return relative to the broader market and REIT industry.

Here’s a look at what you would have now if you had invested in high-yield WP Carey ten years ago and why the dividends are so important.

It all depends on how you look at it

When most investors look at a stock chart, they focus on the stock price appreciation. On this front, the S&P 500 is up 176% over the past decade (as of September 7, 2012). WP Carey is falling behind, with a stock price increase of 91.7%. That’s far better than the average REIT, which rose just 39.8% over the same period, but significantly below the S&P 500.

Image source: Getty Images.

Putting that in dollars, the S&P 500 stock price would have turned a $10,000 investment into $27,650. WP Carey reportedly finished at $19,180. And the average REIT would have reached $13,970.

It’s no surprise that WP Carey lags the index on stock price performance, given that much of what investors get here is dividend income. Note that its yield today is about 3.5 times the yield investors perceive from the S&P 500.

What happens to the performance numbers if you reinvest those dividends? WP Carey’s big dividend changes everything about the total return number. In fact, the REIT’s total return exceeds that of the S&P 500! Over the past decade, the company’s total return, which includes reinvested dividends, was 242.2%, compared to 234.6% for the S&P 500 and a somewhat disappointing 106.9% for the REIT. medium. In dollars, a $10,000 investment in WP Carey would have reached $34,240. The same amount in the S&P 500 would have reached $33,450, with the average REIT at $20,690.

WPC Total Return Price Chart

WPC Total Yield. Data by YCharts.

The difference between stock price return and total return highlights the incredible importance of dividends. WP Carey is also a well-managed REIT, which is equally important.

A strong core

Past performance, as the legal disclaimers say, is not a guarantee of future results. Still, WP Carey offers some pretty impressive fundamentals to back up its past performance. For example, it has increased its dividend every year since its initial public offering (IPO) in 1998. It is poised to become a Dividend Aristocrat, an elite group of stocks that have increased their dividend every year for at least 25 consecutive years.

It also has one of the most diversified real estate portfolios in the REIT industry, with assets spanning industrial (26% of rents), warehouse (24%), office (20%), retail (16%) and self-storage (5%). A sizeable “other” group rounds it up to 100%.

On top of that, around 64% of the rents are domestic, with the rest coming from foreign countries, mainly in Europe. This plays into the company’s opportunistic investment approach, allowing it to put the money to work in the sectors and regions where management sees the most value.

The REIT has a history of working directly with companies through sale-leaseback transactions. This allows him to set the terms of the lease and gives him insight into the tenant’s finances. He will often work with companies with lower credit quality if he thinks the tenants are strong enough to reliably cover rents, benefiting if those companies get credit improvements down the line. Meanwhile, to protect itself and shareholders in such situations, WP Carey focuses on critical assets that a company cannot easily walk away from.

And there’s the net tenancy approach, which means WP Carey’s tenants are responsible for most of the operating costs of the assets they occupy. Although net leasehold properties are generally single-tenant, increasing the risk of an individual asset, the Company’s net leasehold properties are relatively low risk when spread across more than 1,300 properties than she owns. The current inflationary environment highlights this, since the REIT’s tenants – not the company itself – are those who will be most affected by the sharp increases in operating costs.

It’s time to dig

If you’re looking to add real estate exposure to your portfolio, whether or not you’re an income or growth-oriented investor, WP Carey clearly deserves a closer look. While dividends may not be a priority for investors seeking capital appreciation, when you combine this REIT’s strong business model with reinvested dividends, the bottom line has consistently delivered superior results. at the market. And it shows why investors shouldn’t focus exclusively on stock price charts, because they don’t always tell the whole story.

Comments are closed.