It’s starting to happen…
Companies are finally becoming aware of the ticking time bomb that’s about to detonate in the market.
And they are having to face some tough decisions to prepare for what’s ahead.
Just last week, a once pristine dividend-paying company shocked the markets. The coming crisis forced its hand, and on its 50th anniversary the company cut its dividend.
Here at Intelligent Income Daily, we don’t just want to warn you about the explosion ahead… we want to prepare you and steer you toward financial safety.
Today, I’ll share the name of the company I mentioned above, explain why it cut its dividend, and give you a chance to learn more… and prepare for what’s coming.
A Tough Decision
In 2022, W.P. Carey (WPC) finally became a Dividend Aristocrat, a company that’s increased its dividend for 25 straight years.
Only 67 companies in the entire U.S. held this title until last week when that number went down to 66.
Last Thursday, W.P. Carey made a surprise announcement and voluntarily cut its dividend. The news sent shockwaves through the commercial real estate (CRE) sector.
The reason this was such big news, is that W.P. Carey is one of the largest and most respected net lease Real Estate Investment Trusts (REITs) in the U.S. with a market cap over $12 billion.
And as a refresher, net lease agreements are rental contracts where the tenant is responsible for paying for property taxes, insurance, and maintenance – in addition to rent and utilities.
The fact that this company – held up as a model for other CRE retail companies – would willingly choose to cut its dividend right after receiving the title of Dividend Aristocrat… is extremely concerning.
It will take them another 25 years of increased dividends to gain this title back.
But W.P. Carey read the writing on the wall and saw the same crisis coming that we do.
Parts of the commercial real estate market are at severe risk. And when the market breaks, if companies are not prepared, it could be decades before they recover.
That’s why W.P. Carey sacrificed its Dividend Aristocrat title in the very same year it was earned.
So what weakness/exposure to this upcoming crisis caused management to willingly kill its precious dividend streak?
Its exposure to the office sector.
W.P. Carey is packaging most of its office properties into a new company.
And to do this it needed more capital – the same capital that could have been used to once again increase its dividend.
This move allows W.P. Carey to get rid of the office properties without having to fire sell them in the open market. And it doesn’t require approval from shareholders either.
The strategy is smart because W.P. Carey gets the office properties off its balance sheet as quickly as possible. And they know that there is no time to kid around.
Existing W.P. Carey investors will be given shares of the new company as part of the transaction. And in effect, the office properties will now be the shareholders’ problem, and not W.P. Carey’s.
As painful as the dividend cut is, crises require tough decisions… and W.P. Carey had to make one.
If they held on to the properties, the company would face huge losses in the scenario that’s about to play out.
The Ticking Time Bomb About to Go Off
A “debt wall” in commercial real estate is coming to every major city near you. And that debt adds up to about $21 trillion.
As it comes due, the market is going to crash in a big way… and the banks are not going to step in to save anyone. As we saw earlier this year, the banks are barely holding on.
The banking crisis isn’t over. It’s just been simmering under the surface.
New loans will not be available for companies whose debt comes due, and a major credit crunch will begin.
And it could happen as early as November 30.
Companies with the wrong type of real estate won’t be the only casualties.
Another sector will have it much, much worse. A sector tied to AI…
At Wide Moat Research, we’ve been working hard behind the scenes developing a system to identify which companies are at the most risk. And how to profit from their downfall.
I recently sat down with our founder, Brad Thomas, to explain exactly what’s going on and how it all ties together.
And if you act quickly, you can use our strategy to profit from what the rest of the market doesn’t yet see coming.
W.P. Carey’s surprise announcement is just the beginning. Click here, to find out the rest of the story and make sure your portfolio is set up to profit rather than plummet.
Happy Investing,
Stephen Hester
Analyst, Intelligent Income Daily