Key Points

• W.P. Carey offers a lofty 5.8% dividend yield.

• The real estate investment trust cut its dividend in 2023.

• Investors may not appreciate the growth potential for this industrial focused net lease REIT.

The S&P 500 index (SNPINDEX: ^GSPC) is offering a tiny 1.3% or so yield and it is trading near all-time highs. That's not a great backdrop for dividend investors trying to find high-yield stocks. But if you take your time and do your research, you can still find attractive income opportunities. W.P. Carey (NYSE: WPC) and its 5.8% yield could be just what you are looking for, if you don't mind buying when other investors are selling.

What is a net lease REIT?

W.P. Carey is a net lease real estate investment trust (REIT). That means it generally owns single-tenant properties for which the tenant is responsible for most property-level expenses. W.P. Carey competes with large peers like Realty Income (NYSE: O) and NNN REIT (NYSE: NNN). Realty Income is the largest player in this segment, with a market cap of about $50 billion. W.P. Carey is No. 2 at $13 billion, with NNN REIT coming in at about $8 billion.

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Net lease REITs tend to be fairly boring and reliable income stocks. The big driver of the business is sale/leaseback deals that are more of a financing transaction for the seller. Which is why all three of these stocks are out of favor right now because higher interest rates crimp the profitability of net lease REITs and their ability to ink new deals. W.P. Carey's stock has performed the worst, down about 30% from its highs in 2019.

Some of that underperformance can be attributed to one simple fact. NNN REIT has increased its dividend annually for 36 years. Realty Income has increased its dividend annually for 30 years. W.P. Carey cut its dividend in 2023. But don't skip W.P. Carey for this reason because it has a lot to offer.

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What's different about W.P. Carey?

The first issue to address is the dividend cut, though "dividend reset" is probably a better characterization of the event. In 2023 W.P. Carey made the decision to exit the troubled office sector and sell its office holdings. That move necessitated lowering the dividend because of the size of the office property segment in its portfolio. It is now focused on industrial, warehouse, and retail properties, all of which are more lucrative property segments. The company started increasing the dividend again the quarter after the cut and has been increased each quarter since, which is the same pattern as before the reduction.

The portfolio is in much better shape today than it was before the office exit. And the industrial and warehouse focus sets W.P. Carey apart from Realty Income and NNN, which both focus heavily on retail. Pairing W.P. Carey with one of these two net lease REIT peers could actually make a nice combination that covers a lot of ground.

But the big story is that W.P. Carey's office exit left it with cash to invest in new properties. It has been putting that money to work and that will likely boost growth during the next couple of years. Notably, net lease giant Realty Income's last dividend hike amounted to a year-over-year increase of 0.2%. W.P. Carey's last increase was over 3% year over year.

That's a trend that is likely to continue during the near term as new acquisitions start to generate cash flow. But there's more to the story, because W.P. Carey tends to build inflation-linked rent escalators into its leases. That further supports growth and sets the company apart from its peers, which aren't as aggressive on this point.

Don't discount W.P. Carey because of the cut

When investors look at the net lease REIT sector they often default to Realty Income or NNN REIT. That's not a bad thing, but don't overlook the opportunity W.P. Carey presents. Up until the dividend reset, the company had raised its payout for 24 consecutive years. And given W.P. Carey's relatively strong dividend growth, it could be well worth stepping aboard even for conservative investors once they understand the backstory.

Most important, however, is the differentiated property focus offered by W.P. Carey, given its emphasis on industrial and warehouse assets. If you are looking at Realty Income or NNN REIT, you might actually want to buy them and add W.P. Carey, too, to more fully round out your net lease exposure.

Should you invest $1,000 in W.P. Carey right now?

Before you buy stock in W.P. Carey, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and W.P. Carey wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

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See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Reuben Gregg Brewer has positions in Realty Income and W.P. Carey. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

I really want to become financially independent. I don't like the stress of worrying about how I'll make a living if AI eventually takes my job. This desire is driving me to grow my sources of passive income. My goal is to eventually generate enough passive income to cover my basic living expenses. That way, I won't have to fret if my income from working were to disappear.

My foundational strategy is investing in high-quality, high-yielding dividend stocks. One of my core holdings is W.P. Carey (NYSE: WPC). I recently bought more shares of the high-yielding real estate investment trust (REIT), which I expect to continue doing in the future. Here's why I believe W.P. Carey can help me reach financial independence through passive income.

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Built for income

W.P. Carey owns a well-diversified portfolio of high-quality, operationally critical properties across North America and Europe. It primarily invests in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases with built-in rent escalations. Net leases provide it with stable rental income because tenants pay all property operating costs, including routine maintenance, real estate taxes, and building insurance. Meanwhile, the rental income tends to rise each year as its leases escalate rents. Forty-seven percent of its leases climb at a fixed rate, while 50% are tied to inflation.

The diversified REIT aims to pay out 70% to 75% of its stable cash flow in dividends. That gives it a comfy cushion while allowing it to retain some cash to fund new income-generating real estate investments.

W.P. Carey also has a rock-solid investment-grade balance sheet. It maintains a conservative leverage ratio with a target in the mid-to-high fives range. The ratio came in at 5.8 at the end of the first quarter. Its strong balance sheet gives it the capacity to continue paying dividends and growing its portfolio during more challenging times.

The combination of stable income and financial strength puts W.P. Carey's high-yielding dividend on a sustainable foundation. For context, its 5.8% yield is about four times higher than the S&P 500's sub-1.5% dividend yield.

Dual growth drivers

W.P. Carey has more embedded rent growth than the typical net lease REIT because more of its leases feature escalation clauses that link rates to inflation. That strategy has paid off in more recent years as elevated inflation has driven faster rent growth for W. P. Carey. Its same-store annual base rent rose at a 2.4% annualized pace in the first quarter and has increased by as much as a 4.3% annualized rate in recent years. For perspective, leading net lease REIT Realty Income expects to capture only around 1% annual base rent growth this year because of lower annual fixed rental rate escalations.

New investments are W.P. Carey's other growth driver. It expects to spend between $1 billion and $1.5 billion to add new properties to its portfolio this year. It has already secured nearly $450 million of new investments in the first quarter, including a $136 million, 59-property sale-leaseback transaction with Reddy Ice for industrial and warehouse properties in the United States. It also had about $120 million of development projects scheduled for completion this year and several hundred million dollars of additional deals in advanced stages in the pipeline.

The company plans to internally fund its 2025 investment rate through post-dividend free cash flow, non-core asset sales, and new debt while remaining within its targeted leverage range. W.P. Carey intends to sell between $500 million and $1 billion of properties this year, primarily self-storage properties not currently secured by net leases. It's also selectively selling retail and warehouse properties linked to lower-quality tenants. The REIT can increase its investment rate if market conditions improve by selling stock to fund additional new investments.

Rising rental income and portfolio growth positions W.P. Carey to grow its cash flow per share. That allows the REIT to raise its dividend. It has hiked its payment level every quarter since resetting its dividend following its strategic decision to exit the office sector in late 2023 by selling and spinning off those properties. Before that, W.P. Carey had increased its dividend at least once annually for a quarter century.

An attractive and steadily rising income stream

W.P. Carey has everything I want in a passive income investment. The REIT's portfolio generates very stable cash flow to support its high-yielding dividend. It also has the financial flexibility to grow its portfolio, which allows it to steadily increase its dividend. That attractive and growing income stream will help me reach my passive income target sooner. It's why I keep buying shares of W.P. Carey and expect to continue adding to my position in the future.

Should you invest $1,000 in W.P. Carey right now?

Before you buy stock in W.P. Carey, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and W.P. Carey wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,386!*

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See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Matt DiLallo has positions in Realty Income and W.P. Carey. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

If you're concerned about having enough income after you retire, there are lots of options. Buying rental properties is a popular one, but finding tenants and keeping up with maintenance often requires more effort than many retirees have in mind.

If dealing with contractors and tenants isn't your idea of a good time, I have great news. Real estate investment trusts, or REITs, are a terrific way for everyday investors to collect rent without owning any buildings themselves. REITs trade like stocks, but these specialized entities can legally avoid income taxes by distributing at least 90% of their profit to shareholders as dividends.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Realty Income (NYSE: O) and W.P. Carey (NYSE: WPC) are well-established REITs that offer an average yield of 5.8% at recent prices. That means $17,300 spread between them is enough to produce $1,000 in annual dividend income. Here's why they're great options for folks who want passive income they can rely on to grow steadily throughout their retirement years.

1. Realty Income:

Realty Income is a net lease REIT that finished 2024 with 15,621 properties in its portfolio. The vast majority of annual rent it receives comes from retail properties resilient to e-commerce trends, such as convenience stores, dollar stores, and pharmacies. At recent prices, it offers a 5.7% dividend yield.

Realty Income's portfolio is well diversified. Its three largest tenants -- 7-Eleven, Dollar General, and Walgreens -- are responsible for just 10% of total rent.

Troubled businesses like Walgreens illustrate how net lease REITs like Realty Income can produce steady gains for patient investors. The troubled pharmacy chain suspended its dividend this year and will most likely be acquired by a private equity firm. Despite the turmoil, we haven't heard a peep from Realty Income about the pharmacy chain missing any lease payments.

Realty Income offers a monthly dividend payment that has risen steadily since the company's inception in 1969. In March, it raised its monthly dividend for the 130th quarter since becoming a publicly traded business in 1994.

The past decade hasn't been a historically great time to own commercial real estate. By rinsing and repeating its time-tested net lease operation, though, Realty Income has been able to increase its dividend at a 3.9% annual rate since 2015.

At recent prices, Realty Income offers a big 5.7% dividend yield, and steady growth at the usual pace shouldn't be too difficult. The REIT didn't enter the European net lease market until 2019, and this region is still brimming with opportunities. Realty Income and its peers account for less than 0.1% of the addressable market in that region.

2. W.P. Carey

While Realty Income's dividend has only moved in one direction, W.P. Carey lowered its quarterly payout in 2023 to compensate for the spinoff of its office portfolio as Net Lease Office Properties. Dividend reductions aren't something REIT investors want to see, and they punished the stock severely.

Adjusting its payout 19.7% lower to $0.86 per share in 2023 led to a dramatic stock market beatdown that the diversified net lease REIT hasn't completely recovered from. At recent prices, it offers a big 5.9% dividend yield.

After spinning off its office portfolio, W.P. Carey quickly returned to raising its payout every quarter. The payout investors received in April was 3.5% higher than the one they got a year earlier.

W.P. Carey's 1,555 property portfolio is arguably more diversified than Realty Income's. Its three largest tenants are a self-storage business called Extra Space Storage, a generic drug manufacturer called Apotex, and a business-to-business wholesaler in Italy named Metro. These top three tenants are responsible for just 7.1% of annualized rent.

Sometimes, net lease REITs buy or develop properties first and find tenants later. Mostly, though, they function as lenders through sale-leaseback transactions. By investing in properties that its tenants already use, W.P. Carey's occupancy rate hasn't dipped below 98% since 2011.

Being a big, well-established REIT gives a huge cost advantage to W.P. Carey. During the fourth quarter of 2024, it borrowed 600 million Euros at just 3.7% for 10 years. With access to inexpensive capital and a European market ripe for sale-leaseback financing, there's a good chance this REIT can keep raising its dividend payout throughout your retirement years.

Should you invest $1,000 in Realty Income right now?

Before you buy stock in Realty Income, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Cory Renauer has positions in W.P. Carey. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Extra Space Storage. The Motley Fool has a disclosure policy.

When the market starts to tumble, more aggressive investors often start looking for bargains in the list of previous top performers. For example, American Express has fallen nearly 30% from its early-year highs. But its yield is only around 1.4% even after that stiff drop. At the other extreme, investors sometimes reach for yield with a company like AGNC Investment, which is down nearly 20% from its peak and yields a huge 16%. But AGNC's dividend history includes repeated dividend cuts.

It would be better for income investors to stick with their core approach. Buying popular stocks that have sold off, but not enough to give them an attractive yield (like American Express), or ultra-high-yield stocks with unreliable dividend histories (like AGNC) could be a setup for disappointment. It is far better to stick with reliable high-yield stocks that are likely to keep rewarding investors even in a market downturn or recession -- like this trio, with yields up to 6%.

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1. UDR's core business is a basic necessity

UDR (NYSE: UDR) is a real estate investment trust (REIT), just like AGNC Investment. Only AGNC Investment is a mortgage REIT, a fairly complex type of REIT, while UDR is a property-owning REIT that focuses on apartments. UDR's dividend yield is an attractive 4.2% and the dividend has been increased for 16 consecutive years. That's in stark contrast to AGNC's dividend, which has been in a downtrend over that entire span.

What's interesting about UDR's business is that housing is a necessity. Bear markets and recessions don't change the need for having a roof over one's head. On top of that, this apartment landlord has one of the most diversified portfolios in the apartment REIT sector, with operations in coastal markets and in the sunbelt, in urban and suburban locations, and with both A and B quality assets. With a downtrend in construction of new apartments in UDR's markets expected to last until late 2026, this high-yield landlord appears well positioned to weather the current market and economic turbulence.

2. Toronto-Dominion Bank is out of favor, but still financially strong

Next up is Toronto-Dominion Bank (NYSE: TD), which is usually just called TD Bank. The bank was in its own personal bear market before the S&P 500 started to waver, in stark contrast to fellow financial giant American Express, which was trading near its all-time highs. That's worth noting because American Express has fallen nearly 30% from its 2025 highs while TD Bank is only down around 10%. That difference is largely because so much bad news is already priced into TD Bank's stock.

The bad news is that TD Bank's U.S. operations were used to launder money. It had to pay a large fine, is upgrading its internal controls, and is living under an asset cap in the U.S. market. The asset cap basically limits TD Bank's ability to grow its U.S. operations, which were expected to be the bank's growth engine. This is a black eye for TD Bank, but it isn't a knockout punch. In fact, the Canadian bank increased its dividend 3% after it announced the resolution with U.S. regulators. And once the asset cap is lifted, which could take a few years, U.S. growth will likely resume.

Meanwhile, TD Bank's Canadian operations are unaffected and the bank remains one of the largest and best-positioned financial institutions in that country. Given the downturn in the company's shares that has already happened, this bank giant is a low-risk turnaround that most income investors will probably find appealing. Note, too, that TD Bank didn't cut its dividend during the Great Recession, as did many of its U.S. bank peers, suggesting it's a resilient business even during the worst of times. Its yield is 5.1%.

3. W.P. Carey is a nuanced selection

Net lease REIT W.P. Carey (NYSE: WPC) cut its dividend in 2024 after deciding to exit the office property sector. Investors didn't like that move even though it has made this globally diversified REIT a better company. Notably, the dividend went right back to its quarterly increase cadence following the cut. That's a sign that W.P. Carey is operating from a position of strength and that the office exit was a business reset, not a sign that the REIT was struggling. And the cut clearly wasn't the start of a trend, like the long downturn in AGNC's dividend. W.P. Carey's dividend yield is a lofty 6% or so.

What's interesting here is that Wall Street has been in a show-me state of mind with W.P. Carey since the cut. And now, as 2025 has moved along, the mood among investors has become broadly negative. And yet the cash from the office exit allowed W.P. Carey to invest in new assets, a large portion of which were bought in late 2024. The financial benefits from those assets are going to start showing up this year. Since most investors aren't likely to be looking for W.P. Carey's return to growth in a bear market, the high-yield REIT remains an attractive bargain.

Don't change your approach in a downturn

Market sell-offs create powerful emotions that investors have to control or they risk making less-than-ideal investment decisions. This is the time to stick to your core investment approach, which is likely to mean buying attractive companies with attractive yields, not reaching for yield and potentially jumping in to buy a falling knife. UDR, TD Bank, and W.P. Carey all have strong stories and strong businesses... and the types of dividends and yields that should help you sleep well at night when Wall Street has become a little messy.

Should you invest $1,000 in UDR right now?

Before you buy stock in UDR, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and UDR wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

American Express is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has positions in Toronto-Dominion Bank and W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.