Realty Income and W.P. Carey: Perfect Together

I ain Realty Income (NYSE: O), the largest nett lease existent property concern spot (REIT). I besides ain W.P. Carey (NYSE: WPC), the second-largest nett lease REIT. On the surface, that suggests I'm doubling down connected net-lease properties. However, determination are immoderate important nuances erstwhile you excavation successful a small bit.

Realty Income and W.P. Carey some usage the nett lease approach. A nett lease requires the tenant to wage for astir property-level operating costs. That information leads to little operating costs and reduced risks for the REITs. They besides absorption heavy connected sale-leaseback transactions, meaning they bargain assets from companies that crook astir and go tenants. This is usually a financing transaction for the sellers, allowing them to rise currency for different purposes portion retaining effectual power of the property.

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Sale/leasebacks let Realty Income and W.P. Carey to excavation profoundly into the seller's business. And, if a woody is consummated, to fastener successful a tenant they cognize good with a semipermanent lease that includes regular rent hikes. The nett lease concern exemplary is attractive, but wherefore ain the 2 largest players successful the space?

Buying 2 REITs that bash the aforesaid happening would usually summation attraction successful a spot sector. However, that's not precisely what's happening here, due to the fact that nett lease isn't a spot assemblage truthful overmuch arsenic an concern approach.

Realty Income's portfolio is focused connected single-tenant retail properties, which relationship for astir 80% of its rents. The remainder of the rent rotation is made up of concern assets (15% of rents) and "other" (the remainder). Realty Income's "other" class includes immoderate large, one-off properties, specified arsenic casinos and information centers. W.P. Carey's portfolio is tilted the different way, with concern assets making up astir two-thirds of the rent roll. The remainder is retail (22%) and "other" (the remainder).

In different words, erstwhile you excavation into the existent portfolios these 2 ample nett lease REITs own, they complement each other. Owning some leads to a much balanced wide spot portfolio.

If you are looking for dividend stocks today, you'll besides admit the information that Realty Income and W.P. Carey person lofty yields, astatine 5.2% and 5.3%, respectively. While either 1 would beryllium absorbing connected its own, owning some of these ample nett lease REITs could beryllium the champion enactment of all.