It's Been Over 30 Months Since W.P. Carey Stock Set Its All-Time High. Here's 1 Reason to Buy Today.

W.P. Carey's (NYSE: WPC) stock price peaked in July 2022 at almost $78 per share. That was more than 30 months ago. Today, shares are in the mid-$60s, or about 30% below that peak.

Two factors have weighed on the real estate investment trust's (REIT) stock price: interest rates and portfolio changes. While interest rates are out of the company's control, it's actively working to rebuild its portfolio. That strategy is starting to pay dividends.

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Pivoting the portfolio

W.P. Carey owns a diversified portfolio of high-quality, operationally critical commercial real estate across North America and Europe. While diversification has always been a key hallmark of the REIT, it has shifted its focus away from certain property types over the past couple of years.

In late 2023, the REIT made the strategic decision to exit the office sector. It spun off a portion of its office portfolio to shareholders by creating office REIT Net Lease Office Properties. The company has sold its remaining office properties over the past year.

In addition, W.P. Carey has sold off some other noncore properties. It sold a portfolio of self-storage properties back to the operating tenant last year. It also unloaded some vacant retail and industrial properties and a couple of its hotels. Those sales brought in $1.2 billion in cash.

This portfolio pivot has weighed on the REIT's rental income, cash flow, and dividend payments. Its revenue declined 9.2% to $1.6 billion last year, while its adjusted funds from operations (FFO) fell 9.3% to $4.70 per share. Due to the expected cash flow decline, W.P. Carey reset its dividend in late 2023, ending 25 straight years of annual increases.

Building back better

W.P. Carey has been recycling the capital from asset sales into new properties with better long-term growth fundamentals. It invested a total of $1.6 billion last year, including a quarterly record $841.3 million in the year's final period.

Notable property investments included:

• The $200 million acquisition of four portfolios of discount retail stores, totaling 106 properties net leased to Dollar General.
• A $100 million purchase of a U.S. battery manufacturing facility net leased to Canadian Solar.
• A $100 million sale-leaseback of a five-building manufacturing and industrial campus in Mexico.
• The $100 million acquisition of a data center net leased to an affiliate of Brookfield Infrastructure.
• A $150 million sale-leaseback of industrial and warehouse properties in Italy.
• The $110 million acquisition of a 12-property portfolio of U.S. industrial and warehouse properties.

These investments shared three common themes. The REIT bought high-quality properties secured by long-term net leases with built-in rental escalation clauses, leased to tenants in industries benefiting from growing demand.

W.P. Carey's portfolio rebuild is already starting to pay dividends. After falling for much of last year, the REIT's adjusted FFO per share started to tick back up again in the fourth quarter, rising 1.7%. It benefited from growing rental income at its existing properties (2.6% annualized same-store rent growth) and incremental income from recent acquisitions, which helped more than offset the impact of continued asset sales.

The REIT expects that upward trend to continue in 2025. It plans to invest another $1 billion to $1.5 billion into new properties this year, partially offset by the impact of $500 million to $1 billion of noncore asset sales. The income from those additional properties and continued contractual rent growth should increase its adjusted FFO to a range of $4.82 to $4.92 per share, nearly 5% growth at the high end of its range. That growth should enable the company to continue rebuilding its dividend (it has raised its payment every quarter since resetting the level in late 2023).

That's a conservative outlook. Due to the uncertainty in the market, including the direction of interest rates, W.P. Carey plans to align its investment volume to a level it can fund internally with post-dividend free cash flow and noncore asset sales. However, if market conditions improve, the REIT could ramp up its investment volume and growth rate.

In a better position to grow long-term shareholder value

W. P. Carey hasn't hit a new all-time high in over 30 months. While it could be a while before it reaches its former peak, the REIT is working to rebuild shareholder value by pivoting its portfolio to higher-quality properties. That strategy is already starting to pay dividends. The REIT's adjusted FFO per share is growing again, which should continue. That growth should help steadily push the stock price back toward its all-time high.

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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Net Lease Office Properties, and W.P. Carey. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.