Why W.P. Carey Stock Slumped About 16% in 2024

Shares of W.P. Carey (NYSE: WPC) declined 15.9% in 2024, according to data from S&P Global Market Intelligence. That significantly underperformed the S&P 500, which gained 23.3% on the year.

Here's a look at what weighed on the diversified REIT last year and whether it can bounce back in 2025.

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Tearing down to build back better

W.P. Carey made a major strategy shift in late 2023. The REIT decided to exit the challenging office sector by spinning off and selling its office portfolio. As a result of that move and a desire to retain additional cash flow for new investments, the company also reset its dividend toward the end of that year. That cut ended a quarter-century of dividend increases.

The REIT spent much of the first half of 2024 selling off its remaining office properties. It also sold several other properties, including a large self-storage portfolio, which went back to the operator. The landlord was on track to sell $1.3 billion to $1.4 billion of properties last year. That followed the sale of more than $450 million of properties in 2023 and the spinoff of other office properties by creating office REIT Net Lease Office Properties.

These divestitures weighed on W.P. Carey's earnings. It expected its adjusted funds from operations (FFO) to be between $4.65 and $4.71 per share last year, well below the $5.18 it earned in 2023.

W.P. Carey steadily recycled the capital from those sales into new properties with better long-term fundamentals. Last year, it invested $1.6 billion into new properties, including a record fourth-quarter volume of $845 million. That was toward the top half of its $1.25 billion-$1.75 billion guidance range. It primarily purchased industrial and retail properties across North America and Europe, secured by long-term net leases with built-in rent escalations.

The REIT also slowly built back its dividend. It raised its payment every quarter last year following its reset toward the end of 2023.

The rebuild should continue in 2025

W.P. Carey's strong finish to last year gave it a lot of momentum heading into 2025. "The full benefit of these investments will flow through our earnings in 2025," CEO Jason Fox stated in a press release detailing its 2024 investment volume. On top of that, he noted that the company would continue to benefit from its best-in-class rent escalation.

The REIT is also in a strong position to continue making new investments this year without selling any stock. It has built up substantial liquidity from asset sales and has additional noncore assets it can sell to fund new investments. These catalysts position the REIT to grow its adjusted FFO from last year's new baseline and continue increasing its reset dividend in 2025 and beyond. Add that growth to the REIT's already attractive yield of about 6.5%, and it could produce strong total returns from here.

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Matt DiLallo has positions in Net Lease Office Properties and W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.