If you’ve ever been a landlord, you know finding reliable tenants is everything. Tracking down late payments every month makes your passive income stream a lot less passive.
That’s one reason why so many investors like real estate investment trusts (REITs) — publicly traded companies that collect rent from their properties and pass it along to shareholders in the form of dividends.
Investors don’t have to worry about screening or evicting tenants. Instead, they simply sit back and enjoy the dividend checks rolling in when they pick a winning REIT.
And some REITs have seriously blue-chip tenants — including the U.S. government. We all pay taxes, so why not get some money back in quarterly distributions?
Here are a couple ways to act as landlord to Uncle Sam.
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Easterly Government Properties (DEA)
Easterly is not the largest REIT on the market, but it stands out among its peers for a very simple reason: The company’s mission is to acquire, develop and manage commercial properties leased to the U.S. government.
In its latest investor presentation, the REIT said 98% of its lease income is “backed by full faith and credit of the U.S. government.” Few tenants are more reliable.
As of June 30, Easterly’s portfolio consisted of 94 properties totaling 9.1 million square feet. They were 99% leased, with a weighted average remaining lease term of 10.0 years.
The company pays quarterly dividends 26.5 cents per share. At the current share price, that translates to an annual yield of 6.7%.
While Easterly might seem like an obvious choice, given the caliber of its tenants, the stock has actaully plunged over 30% year to date.
If you don’t want to gamble on individual winners and losers, you can always build a diversified passive-income portfolio just by using your “spare change.”
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Office Properties Income Trust (OPI)
As the name suggests, this REIT owns a lot of office buildings — its portfolio consists of 172 properties totaling 22.5 million square feet.
Over the past 12 months, OPI shares have tumbled 48%. It has a quarterly dividend rate of 55 cents per share and offers a staggering annual yield of 15.2%.
Unlike Easterly, OPI is not a pure-play government landlord. But the U.S. government is the REIT’s biggest tenant, contributing 18.5% to its annualized base rent.
Its other top tenants include big names like Google parent company Alphabet, the State of California and Bank of America.
The company says it earns 63% of its revenue from investment grade tenants — that is, tenants that pose a low risk of default.
In Q2 of 2022, the REIT’s same-property cash basis net operating income improved 1% year-over-year. It leased 679,000 square feet of space during the quarter for a weighted average lease term of 9.2 years.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
