The benchmark stock indexes keep climbing to new heights, but there are plenty of attractive wallflowers at this dance. A couple of overlooked dividend payers offer high yields and reliable dividend payout growth, but you wouldn’t know it by looking at their stock prices.
Shares of W.P. Carey (NYSE: WPC) and Royalty Pharma (NASDAQ: RPRX) were beaten down to 52-week lows not long ago, and they’ve only recovered a little. Let’s kick the tires on these stocks to see why adding them to a diversified portfolio at beaten-down prices gives you a great chance to come out way ahead over the long run.
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W.P. Carey is a real estate investment trust (REIT) that has been trading for about 35% below the high watermark its stock price hit in 2022. At recent prices, it offers a 6.2% yield.
Shares of this REIT have been under pressure since it spun off 59 buildings into Net Lease Office Properties in late 2023, and adjusted its dividend accordingly. Now that its problematic office buildings are another company’s responsibility, W.P. Carey can boast a 98.8% occupancy rate.
Instead of operating its properties, W.P. Carey gets tenants to sign net leases that transfer all the variable costs of building ownership to the tenant. With annual rent escalators written into long-term leases, the REIT was able to raise its dividend payout for 24 consecutive years before lowering it to account for the Net Lease Office Property spinoff.
Since the spinoff, W.P. Carey has lifted its dividend payout three times, and it could grow further in 2025. Management expects adjusted funds from operations, a proxy for earnings, to land between $4.65 and $4.71 per share this year. That’s heaps more than the REIT needs to meet its present dividend obligation, which is currently set at just $3.50 annually.
Beyond 2025, income-seeking investors can look forward to steadily rising payouts from this geographically diversified REIT. It owns 1,430 single-tenant buildings spread throughout Europe and North America.
W.P. Carey’s tenant list is also well diversified, with the largest renter responsible for just 2.7% of rental payments expected in the year ahead. Its 10 largest tenants are responsible for just 20.2% of the REIT’s annualized base rent. This probably won’t be the fastest dividend raiser in your portfolio, but it could be the most dependable.
Individual drug launches are more than a little unpredictable, but increasing prescription drug expenses is an extremely reliable trend that income-seeking investors can use to their advantage by investing in Royalty Pharma. At recent prices, the stock offers a 3.2% yield.
