Collect a 11.8% High Dividend Yield from WPG Stock
September 13, 2017
Earn a 11.8% High Dividend Yield
In the current low-interest-rate environment, it can be very difficult to find an income-oriented investment providing a high rate of return. I have found a high-quality investment that is offering an 11.8% yield.
With this investment, there is no need to trade frequently in the marketplace and/or follow a specific trend. You simply acquire shares and then receive a check for being a part owner of the company.
The company that is offering such a high dividend yield is Washington Prime Group Inc (NYSE:WPG). The focus of the business is owning, developing, and managing retail real estate assets in the United States. There are also parcels of land owned that will be used for future expansion projections or for developing new buildings from the ground up. WPG presently has an interest in more than 100 shopping centers.
Another benefit for investors is that WPG is a real estate company, providing exposure to the market without the need to manage tenants. No chasing anyone down for a rental check or ensuring the property meets regulations.
All that said, let’s take a closer look at why you may wish to consider WPG stock for your own portfolio.
Attractive Valuation
Determining whether a stock is cheap shouldn’t be done based on the stock chart. What you should do is look at historic stock prices and compare them to where the stock is trading today. The method of determining whether a stock is cheap is based on how much of a trading multiple is on each $1.00 of earnings. The lower the trading multiple, the better for investors.
The company’s trading multiple would be compared to its peers in the retail real estate market. These companies experience the same affects from government regulations (such as taxes), the performance of the economy, and the management of interest rates by the Federal Reserve.
The trading multiple uses the price-to-earnings (P/E) ratio, which is 10.5 times ($10.50 per $1.00 of earnings) for WPG stock. This would compare to 90.9 times ($90.90 per $1.00 of earnings), for the overall industry. When there is such a disconnect in the valuation, it means that either something is wrong with the company or the business isn’t receiving attention from investors. In the case of WPG stock, it seems to be the latter.
Strong Operating Margins
The most important numbers for any company are its margin numbers. These relate to the money that remains after accounting for business operating costs. Unlike the trading multiple, higher is better.
There are three main margin ratios used: gross, operating, and profit margins. WPG’s margins are all higher than its industry peers. For instance, WPG’s operating margins, which are calculated by subtracting variable costs from revenue, are 42.8%, compared to the industry average of 27.1%. This example alone shows that the company has more oversight and control over its managing costs, and that more money is hitting the top and bottom lines as a result.
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And if that wasn’t enough, WPG is considered a growth company, whereas most of its peers are not. This is based on the companies’ return on equity (ROE), which is 18.1% for WPG and 10.4% for the overall industry. An ROE above 15% indicates growth.
This doesn’t look to be changing anytime soon, given the company’s focus on continued growth. For instance, in the last year, WPG sold seven non-core assets, increasing the strength of its portfolio by only owning high-quality assets with a high return on capital.
Also, the debt load has been significantly reduced, which has helped to generate a higher margin and to lower the amount of cash having to go toward debt and interest costs. This frees up more capital to return to investors and reinvest back into the business.
Final Thoughts About WPG Stock
Since there is a dividend yield of more than 10%, there is a higher return being earned on the invested capital. This results in less focus on the stock price, with the hope that investors bid it up to create market-beating returns. Such a high yield also means there is no need track the daily stock price performance and obsess over the price movement.
Initially, when hearing about the double-digit high dividend yield, investors may say WPG stock is a great investment based on a single metric. However, it is always important to take a deeper look at a company, and that includes a potentially great opportunity like Washington Prime Group Inc.
Also Read:
10 Best Real Estate Stocks to Own in 2017
10 Highest-Paying Dividend Stocks for 2017
