W.P Carey stock price has nosedived: don’t buy the dip for now
W.P Carey (NYSE: WPC) stock price has been in a strong freefall in the past few months. This sell-off gained steam this month when the company made huge changes to its business and effectively slashed their dividend. The stock plunged to a low of $53.98 on Tuesday, the lowest level since November 2022.
Avoids being a dividend aristocratCopy link to section
W.P Carey is a big REIT, currently valued at over $12 billion. It has been a dependable company for its shareholders for decades. In fact, the company has historically raised its dividends for more than 24 years straight.
Therefore, investors were caught off-guard when the company delivered major news this month. The restructuring plan calls for spinning off its office portfolio into a separate company.
The remaining company will have a portfolio of projects in the industrial, warehouse, retail, and self-storage. This business has an occupancy rate of 99.3%. Its biggest tenants are U-Haul, Apotex, and Metro.
To a large extent, this move makes sense since the office industry is going through major headwinds. Vacancy rates are rising while a wall of maturities is nearing. Also, the industry is not growing as fast as it did.
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As part of the turnaround strategy, W.P. Carey decided to reset its dividend policy by targeting a pro forma AFFO payout ratio of between 70% and 75%. It also aims to generate $735 million from the spin-off.
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Therefore, the question among investors is whether it makes sense to buy the WPC stock dip, Besides, the company has become highly undervalued. The spin-off will also remove the baggage of its office space business, which has contributed to its recent stock sell-off.
Therefore, I believe that W.P Carey will be a good company to invest in once the current overreaction phase ends. The company will have a chance to restart its dividend growth. It will also attract a higher valuation multiple after getting rid of its office business.
W.P Carey stock price forecastCopy link to section
The weekly chart shows that the WPC share price formed a double-top pattern at $83.54. In price action analysis, this pattern is one of the most accurate bearish signs. It has now dropped below the key support at $65.20, the lowest level in October.
Now, the stock is about to form a death cross, where the 50-week and 200-week moving averages. The MACD has moved below the neutral point. Therefore, the shares will likely continue falling as sellers target the next key support at $43.23.