Realty Income vs. W.P. Carey

• Realty Income is the largest net lease REIT, with W.P. Carey coming in at No. 2.

• Realty Income is focused on retail assets, with W.P. Carey focused on industrial assets.

• Realty Income and W.P. Carey both have attractive yields, but their dividend histories are massively different.

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If you are looking at Realty Income (NYSE: O) you should also be considering W.P. Carey (NYSE: WPC), and vice versa.

These two real estate investment trusts (REITs) are the top two players in the net lease niche. They have a number of similarities, but there are also some important differences.

Here’s what you need to know to make the final call.

Both Realty Income and W.P. Carey own single-tenant properties for which the tenant is responsible for most property-level expenses. This is known as a net lease. Often, net lease properties are created when a company sells a vital property and then instantly signs a long-term lease. It is really a financing transaction, given that the seller retains effective control of the property after it becomes the lessee.

Net lease REITs like Realty Income and W.P. Carey benefit from growing their portfolios and getting a property with a reliable tenant and a long lease term. The leases also tend to have regular rent bumps built into the lease contracts.

From that perspective, Realty Income and W.P. Carey are interchangeable. But there are more similarities.

For example, both own properties in North America and also in Europe, which is more geographic diversification than most of their peers offer. And they both spread their properties across retail, warehouse, and industrial assets, with each having a fairly large collection of “other” property types in the mix.

If you are looking for a diversified REIT, both will fit that bill quite well.

The difference between the two is really more of a nuance. Realty Income is more focused on retail properties, which make up around 75% of its rent roll. W.P. Carey is more focused on industrial assets, which account for roughly two-thirds of its rents.

The dividend is where the most notable differences show up, though there are still some similarities to consider first.

Realty Income’s dividend yield is 5.6%. W.P. Carey’s yield is a touch shy of 5.8%. Both figures are far above the S&P 500 index’s (SNPINDEX: ^GSPC) 1.3% and the average REIT yield of around 4.1%.

And then there’s the big difference. Realty Income has increased its dividend every year for 30 consecutive years. Within that streak it has increased its dividend for 110 consecutive quarters. W.P. Carey’s dividend streak is currently just six quarters long, meaning the annual streak is at one year.