Oct 5, 2023
You don’t need to be a landlord to know that finding the right tenants is the toughest part of the job. Those who can’t or won’t pay rent on time could derail any property investment.
Which is why some of the most stable real estate investment trusts (REITs) have the most reliable tenants. Large corporations with recession-resistant businesses are usually a good bet. But government agencies are even better because they’re not exposed to the market’s boom-bust cycle.
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Here’s a closer look at two REITs that offer attractive dividends derived from renting properties to various state and federal government agencies across the country.
Easterly Government Properties
With just 86 properties, Easterly Government Properties (DEA) is a mid-sized landlord. What makes it special is that it’s completely focused on renting to segments of the U.S. government. In fact, the company targets at least 85% occupancy of each building by a single government agency.
Altogether, it works with over 38 different agencies, ranging from FBI field offices to National Weather Facilities. 51% if the portfolio is considered “mission-critical” for the government’s functions, which further bolsters the portfolio. To be clear, the FBI doesn’t need to change its office locations if interest rates are rising or a recession is brewing.
Simply put, Easterly has a close partnership with the most creditworthy and reliable tenant in the world. Better yet, the stock offers a lucrative dividend yield well above 8%. For income-seeking investors worried about market corrections and recessions, this is an ideal target.
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Postal Realty Trust
As the name suggests, Postal Realty Trust (PSTL) works exclusively with the U.S. Postal Service (USPS). Over 30 years, the company has rapidly accumulated over 1,750 post offices, industrial mail-processing facilities and logistics assets across the country.
The accumulation isn’t over yet. Postal Realty believes the total need for real estate by USPS is worth over $15 billion. And the market is highly fragmented,there’s plenty of room to grow. In its most recent quarter, the team added another 39 properties to the portfolio.
This consolidation helps the company grow at an impressive rate. From the second quarter of 2022 to the second quarter of 2023, Postal Realty’s total revenue expanded by 21%. That’s exciting growth for what is actually a rather mundane business model.
The stock offers a dividend yield just below 7%, paid out quarterly. The upcoming quarterly payment is about $0.24 per share while the company generated $0.27 per diluted share in Adjusted Funds From Operations (AFFO) in the second quarter. That means the dividend payments are sustainable.
Postal Realty stock could be an enticing opportunity for income-seeking investors. But for those seeking growth, it isn’t as appealing. The stock price has been somewhat range-bound since 2019. In fact, the price peaked at $21 in June 2021 and is now trading at just below $14.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
