High growth or high yield? WP Carey vs. Rexford Industrial

There is no right or wrong way to invest in dividend stocks, but there are very different approaches to consider. A Comparison of Real Estate Investment Trusts (REITs) Rexford Industrial (NYSE: REXR) And W. P. Carey (NYSE:WPC) offers a fairly clear reason. If you prefer high-yielding stocks to maximize your income stream, one of these will come out easy. But if you prefer dividend growth, the other will be a better fit.

Here’s what you need to know.

What does Rexford Industrial do?

Rexford Industrial, as its name suggests, owns industrial buildings. However, it takes a fairly unique approach in that it focuses entirely on one market, Southern California. Most REITs attempt to include more diversification in their portfolios, either by owning multiple property types or by spreading their assets across multiple geographic regions. In this way, Rexford is a fairly aggressive investment.

Image source: Getty Images.

That said, Southern California is proving to be a very attractive place to own industrial assets. For starters, it is one of the largest industrial markets in the United States and the world. It faces supply constraints and heavy obstacles to new construction. And it has one of the lowest vacancy rates in the U.S. industrial sector. This has allowed Rexford to aggressively raise prices on expiring leases in recent years. Add to that its history of redevelopment of assets and acquisition of new properties, and Rexford has managed to grow both reliably and quickly.

What does WP Carey do?

At the other end of the diversification spectrum would be WP Carey. Industrial properties represent approximately 64% of the REIT’s rent, but it also owns commercial properties (21% of rents) and has a fairly large “other” tranche (the remainder). Additionally, WP Carey’s portfolio is spread across North America and Europe, where it has operated for over two decades. So while WP Carey is industrial focused, it is much more diverse than Rexford.

The problem with WP Carey is that it recently exited the office sector, which, given the size of the portfolio it had to sell, required a dividend review. This happened in early 2024, but the dividend has now increased every quarter since the reset. It’s a clear signal that WP Carey is back on the growth path, noting that the company has a record level of liquidity for acquisitions following office sales.

The biggest difference between Rexford and WP Carey

When a dividend investor looks at these two industrial-focused REITs, the first big question will be about diversification. If that’s important to you, then WP Carey is the easy choice. However, the next problem will be the dividend. On the performance front, WP Carey is the clear winner. Its dividend yield is 5.5% compared to 3.3% for Rexford. That’s not huge on an absolute basis, but relatively speaking, WP Carey offers investors a significantly higher income stream of 66%. The answer here is pretty obvious if you are trying to maximize the income your portfolio generates.

However, if history is to be believed, WP Carey’s dividend growth will be quite modest over time. Think low to mid numbers. This will likely be enough to keep up with, or even slightly exceed, inflation. But you shouldn’t expect much more than that.

WPC data by YCharts

Rexford, on the other hand, has increased its dividend at a compound annual rate of around 13.5% over the past decade. The rates over the last one, three and five years are all in the double digits. This is a huge growth rate for a REIT and will ultimately increase your purchasing power significantly over time. This also means that your return on the purchase price will be very attractive, even if you don’t actually need the dividend income. And combining the dividend with dividend reinvestment will create an even more attractive total return on investment. The chart above highlights the very different results for dividend growth and high yield investors.

Which REIT is best for your portfolio?

There really isn’t a right answer to the WP Carey vs. Rexford matchup because it depends on what you’re looking to achieve. If you need income now, WP Carey is the best choice. If you prefer a diversified investment, WP Carey will also be a winner. But if you’re a little more aggressive and have a longer time horizon to start using dividends to help pay for living expenses, history clearly suggests that Rexford will be the more attractive option.

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Reuben Gregg Brewer holds positions with WP Carey. The Motley Fool has positions with and recommends Rexford Industrial Realty. The Motley Fool has a disclosure policy.