Beauty is often in the eye of the beholder, a statement that is particularly true on Wall Street. That’s a good setup for a comparison of two real estate investment trusts (REITs) that focus on industrial assets. Is W.P. Carey (NYSE: WPC) a better stock than Rexford Industrial (NYSE: REXR)? It depends on how you do the comparison. Here’s what you need to know.
As a net lease REIT, W.P. Carey’s tenants are responsible for most property-level operating costs. Although any single property is high-risk, since most have only one tenant, across a wide enough portfolio the risk is pretty low. W.P. Carey owns 1,430 buildings with 346 tenants, so the risk is low here. In addition, it has exposure to both the North American and European markets, further increasing diversification.
The REIT also adds in property type diversification, with 15% of rents coming from a broad “other” category and 22% from retail properties. The remainder, around 64% of rents, is focused on industrial assets like warehouses and manufacturing facilities. So this is really an industrial-focused REIT, but one that has a pretty well-diversified mix of assets.
The dividend yield today is around 6.4%. That’s high for a REIT and is at least partly a function of a dividend reset made in 2024. In late 2023, W.P. Carey decided to exit the office sector, an area that has struggled very badly since the coronavirus pandemic’s height, and that necessitated a dividend reduction. But the next quarter after the cut, and every quarter since, the dividend has been increased. That’s why it was really a reset — note that the cadence before the reduction was quarterly increases.
If you are looking for industrial exposure, W.P. Carey is a good high-yield option. Add in the property type diversification and geographic diversification, and the story is even better for more conservative types. The stumbling block is the dividend reset, but even that isn’t so bad when you understand why it occurred.
The problem with W.P. Carey is that it is, basically, a slow and steady tortoise. Even before the dividend reset, dividend growth was modest over time. If you’re looking for a more exciting dividend stock with an industrial focus, you’ll want to examine Rexford Industrial. That said, the dividend yield is a far less compelling 4.3%. However, that’s near the highest level in the REIT’s history, suggesting that it is on sale today.
The big selling point here is dividend growth. Over the past decade, Rexford’s dividend has increased at a compound annual rate of 13%. That’s a high figure for any company and easily beats what is likely to be low-single-digit dividend growth from W.P. Carey over time. But there’s a caveat here because of the investment approach that Rexford uses.
