Market Overview

6 Reasons To Like W.P. Carey

6 Reasons To Like W.P. Carey

Initiating coverage of W.P. Carey Inc. REIT (NYSE: WPC), Baird gave six reasons to like the company.

The firm initiated coverage of the shares of W.P. Carey with an Outperform rating and a $77 price target.

Analyst RJ Milligan noted that the company's shares were trading at a discount to its high-quality net-lease peers over the past few years, given the C-suite changes, an unclear strategy and noise from the investment management business.


However, the analyst believes improved balance sheet, eventual exit of the investment management business and investment track record warrant a multiple more in line with its blue-chip peers.

These are the six reasons why Baird is enamored with W.P. Carey:

1. Diversified Portfolio/Strategy

Baird said the company's diversified approach in both U.S. and Europe and property sectors provides it with more diversification relative to other net-lease peers. The diversification, according to the firm, would also allow the company to be more opportunistic in playing different cycles.

2. Prudent Capital Allocation

The firm said the company has a long track record of prudent capital allocation over the course of several real estate cycles, with minimal credit losses and occupancy in line with other blue-chip net-lease portfolios since 2006.

3. Exit Of Investment Management Business

The firm views the company's decision to stop fundraising through its investment management platform as a prudent move, helping it to eliminate unnecessary noise and potential conflicts.

See also: How to Start Investing In Real Estate

4. Limited U.S. Retail Exposure

Baird noted that merely 4.1 percent of W.P. Carey's rent comes from the U.S. retail. The firm believes this would benefit the company, as investors are rotating into some of the non-retail focused net-lease names.

"We believe WPC's limited US retail exposure and diversified tenant base (by both tenant and sector) should help insulate the stock from continued pressure from investors looking to short bricks and mortar retail," the firm said.

5. Improved Balance Sheet

The firm noted that the company has lower leverage versus its blue-chip peers.

6. Attractive And Well Covered Dividend Yield

The firm noted that W.P. Carey's dividend is yield is 5.8 percent, higher than its peers and for the overall REIT sector. The company boasts of a well-covered 77 percent 2018 adjusted fund flow from operations payout ratio, the firm added.

Latest Ratings for WPC

Jun 2020Wells FargoMaintainsOverweight
Apr 2020CitigroupMaintainsNeutral
Apr 2020Wells FargoMaintainsOverweight

View More Analyst Ratings for WPC
View the Latest Analyst Ratings


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