W.P. Carey: Rebuilding Trust After Dividend Cut

W.P. Carey is on the verge of achieving a significant dividend milestone. Just a few months before the potential 25-year anniversary of continuous dividend increases, however, the Real Estate Investment Trust (REIT) decided to cut the dividend by approximately 20%. This surprising decision shook many investors and shattered the trust painstakingly built over the years. Understanding the background of this decision is crucial for seeing the bigger picture. W.P. Carey decided to withdraw from the office sector — an area affected by the aftermath of the COVID-19 pandemic. To avoid long-term impairments of office properties, the management chose to execute this step decisively and swiftly. The plan involved a spinoff of a large portion of the office portfolio as well as the sale of the remaining office spaces, which once accounted for 16% of rental income. Astonishingly, W.P. Carey raised the dividend again just one quarter after the cut. The return to the previous quarterly level occurred promptly, indicating that the cut was more of a strategic reset than a sign of weakness. Simultaneously, the portfolio remains robust and diversified — a clear advantage in the current market environment. Notably, W.P. Carey is in an opulent liquidity position despite the market uncertainties, which secures the prerequisites for future growth-oriented engagements. This solid financial foundation suggests that the company will soon be able to regain the trust of investors. Given the current dividend yield of 5.8% and the strong financial position, W.P. Carey presents itself as an enticing option for long-term dividend investors willing to consider an undervalued stock with significant potential.