2024-06-04 06:59:24 ET
W. P. Carey (NYSE: WPC) stock price has continued to underperform the market this year. It has plunged by almost 13% even as the S&P 500 and Nasdaq 100 indices have soared by over 10% this year. The Vanguard Real Estate Index Fund (VNQ) has dropped by about 6%.
WPC has become the third-worst performing net lease company after Global Net Lease (GNL) and EPR Properties, which have fallen by 24% and 15%, respectively.
Dividend reset and turnaround
W. P. Carey, one of the biggest REITs in the world, has come under intense pressure this year as the company continues to implement its turnaround.
The biggest step the company made this year was to spin off its office business as the industry faces a wall of maturities. It did that by selling 72 properties for a gross total of about $411 million.
The remaining company focuses on areas like industrial, warehouse, retail, and other industries. Most importantly, 54% of the company’s properties are CPI-linked, meaning that their prices rise as inflation rises.
Further, unlike other REITs, the company has a big exposure in Europe, a continent where interest rates have remained lower than in the United States. The European Central Bank (ECB) is expected to start cutting interest rates later this week, making it cheaper for it to access capital.
W.P. Carey’s stock has crashed because it reset its dividend when it exited the office business. That reset disrupted over 25 years of consecutive dividend growth.
Still, there are some positive signs why WPC may be a good company to invest in for REIT investors. First, despite the recent dividend reset , the company still has a dividend yield of about 6.8%, which is higher than most REITs.
Second, the company has become a leaner organization after shedding its office business. The office sector is going through major challenges as the industry battles higher vacancies and the upcoming wall of maturities.
Third, W. P. Carey has long lease expirations in the coming years. Its expiries this year stand at 1.4% this year and 3.5% in 2025. The weighted average lease term is 12.2% and its historical occupancy rate stood at 99.1% in the first quarter.
Further, the company has a price-to-AFFO ratio of about 11, where it has been stuck at in the past few years. This valuation is cheaper than other industrial REITs like Rexford Industrial Realty (REXR), Prologis (PLD), and Americold Realty Trust (COLD), which have multiples of 25.2, 14.7, and 19.9, respectively.
W.P. Carey stock price analysis
The daily chart reveals that the WPC share price has come under pressure in the past few months. It has plunged by almost 30% from its highest point in 2023. Most recently, its attempts to recover faced a strong resistance $60.47.
It has also moved below the 50-day and 100-day Exponential Moving Averages (EMA) and the 23.6% retracement level.
Therefore, I suspect that the stock will remain under pressure for a while, meaning that it could retest the support at $53.60. In the long term, however, the stock will likely rebound, especially when the Fed starts cutting interest rates.
The post W. P. Carey stock analysis: WPC to get ugly before it gets better appeared first on Invezz