My Favorite Real Estate Passive Income Stock for 2023

One of my monetary objectives is to develop my passive earnings from dividends to $1,000 a month. I’ve bought a option to go, so I’m centered on alternatives to assist me attain that objective sooner. I’m looking for corporations that already pay an above-average dividend that they will develop sooner or later.
This yr, my favourite actual property inventory for passive earnings is W. P. Carey (WPC 3.21%). The diversified actual property funding belief (REIT) presents a greater than 5% dividend yield, which is effectively above the S&P 500’s 1.7% dividend yield. Further, the corporate ought to be capable of proceed rising that payout, thanks partly to inflation-driven hire progress. I plan so as to add extra of the corporate’s rising dividend earnings to my portfolio this yr.

Rock strong rental earnings
W. P. Carey owns a diversified portfolio of operationally crucial actual property. It has over 1,400 properties throughout the economic, warehouse, workplace, retail, and self-storage sectors. The REIT primarily leases these properties to tenants utilizing triple-net (NNN) phrases, making them accountable for masking upkeep, actual property taxes, and constructing insurance coverage. These options allow W. P. Carey to provide very regular rental earnings.
The diversified REIT pays out a beneficiant portion of its rental earnings to traders by way of the dividend. Last yr, the corporate anticipated to generate between $5.25 and $5.31 per share of adjusted funds from operations (FFO). With its most up-to-date dividend cost giving it an annualized fee of $4.26 per share, it has a payout ratio of round 80%. That’s a cushty stage for a REIT that produces regular rental earnings. 
Another issue supporting W. P. Carey’s dividend is its strong investment-grade stability sheet. W. P. Carey has a low leverage ratio, primarily fixed-rate, long-term debt, and many liquidity. That offers it large monetary flexibility.
More dividend progress forward
W. P. Carey has elevated its dividend annually since its preliminary public providing in 1998. That streak is not prone to finish anytime quickly. Driving that view is the corporate’s inflation-driven hire progress and glorious acquisition monitor document.
The firm primarily indicators long-term leases with tenants, over 99% of which have contractually set annual hire will increase. Roughly 40% of its lease charges rise at a set fee, whereas one other 55% develop at a fee linked to the patron value index (CPI). With inflation — as measured by CPI progress — rising quick over the previous yr, W. P. Carey’s rents are rising briskly. The firm’s same-store annual base hire elevated by 3.4% within the third quarter, greater than double the speed on the finish of 2021.
The firm expects inflation to proceed driving sturdy hire progress within the coming quarters. CEO Jason Fox acknowledged within the REIT’s final earnings report, “We additionally proceed to profit from our sector-leading same-store hire progress, which reached a brand new excessive throughout the quarter, pushed by inflation. As present CPI numbers movement by to rents, we count on our same-store progress to maneuver even greater in 2023, and to proceed seeing the advantages into 2024.”
In addition to sooner hire progress, W. P. Carey ought to profit from the continued growth of its world actual property portfolio. The firm acquired $1.3 billion of properties by the third quarter of 2022. In addition, it accomplished its merger with CPA:18, a non-traded REIT it managed, including one other $2.2 billion of actual property property.
The firm expects to proceed buying income-producing actual property. Those offers ought to be much more accretive sooner or later, given the latest rise in rates of interest to fight inflation, which is weighing on actual property valuations. The CEO acknowledged within the earnings report, “While cap charges have been sluggish to regulate to sharply greater rates of interest, deal pricing is more and more getting extra attention-grabbing, and our stability sheet places us able of power to deploy capital at applicable spreads — having raised debt and fairness capital at enticing costs and armed with over $2 billion of liquidity.” By elevating capital when it was cheaper, W. P. Carey is in a wonderful place to capitalize on alternatives to amass income-generating actual property at greater cap charges, making future offers much more accretive to its adjusted funds from operations (FFO) per share.
That mixture of hire progress and accretive acquisitions ought to allow W. P. Carey to proceed rising its dividend in 2023 and past.
Inflation-driven passive earnings
W. P. Carey presents a rock-solid dividend with an above-average yield. The diversified REIT ought to be capable of proceed rising that payout in 2023, thanks partly to its inflation-linked rental contracts. That’s why I plan to purchase much more shares of the diversified REIT this yr to succeed in my passive earnings objective even sooner.

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