Once again I'll come back to a high yield security for income seekers. Of course one of the risks in buying yield these days is related to the threat of higher bond yields that could negatively affect income stocks. What if there were a security that paid relatively secure dividends and benefited from all of the federal government expenditures that are expected to come with another four years of an Obama administration? Clearly I wouldn't be writing this article unless such a security did exist.
Government Properties Income Trust (GOV) is a REIT that owns $1.7 billion of office properties in 31 states (and DC) with 10 million square feet of rentable space. The majority of its space is rented to various governmental entities. Of its 82 properties, 60 are primarily leased to the federal government, 18 are primarily leased to state governments and one is leased to the United Nations. Whatever you may believe about our government finances, it is incomprehensible that governmental entities will simply go out of business (as could happen with a private enterprise), making these leases of a much higher quality. In fact, only about 7% of total revenue comes from private firms. GOV is well diversified geographically and despite receiving so much of its revenue from the federal government, just 10% of revenue comes from DC.
Insiders own 21.37% of outstanding shares firmly aligning management with the interests of shareholders. The forward PE is a reasonable 10.8 and debt a not-unreasonable 70%. Price to book comes in at 1.25. For comparison, a recent REIT unit trust offering by Invesco had a weighted average price to book of over 2. The 5 year expected PEG ratio is 5.24 against 8.48 for the Invesco product. Clearly, in the REIT world, GOV is not overbought. All key metrics were obtained from Yahoo Finance.
Although there have been ups and downs in GOV's stock price (along with volatility in the market, the price has shown a gain of approximately 5% in the past twelve months which, along with the dividend produced double digit gains. Dividend increases have been quite modest, increasing only 2 cents per quarter in the past two years. GOV is not a dividend growth story. GOV provides secure income for the investor looking for a 7%+ yield in a monthly pay security.
Disclosure: I am long GOV.