If you’ve ever been a landlord, you know that finding reliable tenants is everything. Tracking late payments every month makes your passive income stream a lot less passive.
That’s one of the reasons so many investors like it real estate investment trusts (REITs) – publicly traded companies collect rent from their assets and pass it on to shareholders as dividends.
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Investors don’t have to worry about screening or evicting tenants. Instead, they simply pick a winning REIT and they can simply sit back and enjoy the dividend checks coming in.
And some REITs have serious blue-chip tenants — including the Federal Bureau of Investigation.
Here’s how the FBI acts as a landlord — and another REIT primarily for the US government. With all the volatility in today’s market, a steady stream of rental income can help you sleep better at night.
Attributes of government Easterly
Easterly Government Properties (NYSE:DEA) isn’t the largest REIT on the market, but it stands out from its peers for one very simple reason: The company’s mission is to acquire, grow, and manage manage commercial properties leased to the U.S. government.
As of September 30, 2022, Easterly’s top three hires are the Department of Veterans Affairs, the FBI, and the Drug Enforcement Administration. They contribute 23.8%, 16.5% and 8.5% to REIT’s annual rental income, respectively.
In fact, the REIT said 98% of its rental income is “backed by the full faith and confidence of the US government” in its latest investor presentation. Fewer reliable tenants.
At the end of the third quarter, Easterly’s portfolio consisted of 86 properties totaling 8.7 million square feet. They were 99.3% leased, with an average remaining lease term of 10.5 years.
In July 2021, the company increased its quarterly dividend payout to 26.5 cents per share. At current stock prices, that means an annualized yield of 6.7%.
While Easterly may seem like the obvious choice, given the size of the tenants, the stock has actually fallen 30% over the past 12 months – not particularly impressive considering that the S&P 500 is down just 15 % in the same period.
And that could give contrarian investors something to think about.
Although Easterly has received an average “hold” rating from Wall Street analysts, their average price target is $17.25, 9.5% above the stock’s current price. promissory note.
Read more: 4 Simple Ways To Protect Your Money From Soaring Inflation (Without Being a Stock Market Genius)
Office Property Income Trust
As the name suggests, the Office Properties Income Trust (NASDAQ:OPI) owns many office buildings — the fund’s portfolio includes 162 properties with a total area of 21.2 million square feet.
While real estate prices in the US have stabilized during this period of high inflation, OPI has not received much investor attention.
Over the past 12 months, OPI stock has fallen 37%.
But there’s one thing that sets the company apart: it has a quarterly dividend of 55 cents per share and an annualized yield of 12.9%.
To put it bluntly, the average return for the S&P 500 company is just 1.7% right now.
Unlike Easterly, OPI is not a purely government landlord. But the US government is the REIT’s largest tenant, contributing 19.1% to annual rental income.
Its other top tenants include big names like Google’s parent company Alphabet, the State of California and Bank of America.
The company says it earns 63% of its revenue from investment-grade tenants — meaning tenants with a low risk of default.
In the third quarter of 2022, the REIT leased 606,000 square feet of space with a weighted average lease term of 7.2 years and a weighted average occupancy rate of 21.6%.
Like Easterly, OPI has received an average rating of Hold from analysts, but the best that may be yet to come: the average price target on OPI is $20 — about 16% higher than it should be. present.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.
