The idea to take on more risk has been sacrosanct among
investors since the Dutch East India Co. issued the first publicly
availableshares more than 400 years ago. To this day, mostfinancial
advisors build their client portfolios around a combination
ofstocks ,bonds and commodities, depending on how much these
clients need at retirement and how much risk they're are willing to
At least, that is the idea behind mostinvestments .
But if you want a higher return, then you have to take more
A "safe"asset such as the 10-YearTreasury bond , for example,
won't do alot for your portfolio. It's known to be "risk-free,"
because it is assumed that the U.S. governmentwill always pay its
debts. Theyield on thebond is used as a measure for all other risky
assets, including stocks, bonds or commodities. But the "risk-free"
bond yields a measly 2%, whilecorporate bonds and blue-chip stocks
don't yield much more either.
So what if I told you I found astock that can add market-busting
returns to your portfolio with less risk than you might
Here's the story...
Beyond stocks and bonds,real estate has made more people wealthy
throughout history than any otherinvestment . And not more than a
couple of centuries ago, you needed to own property to have many of
the freedoms and rights we enjoy today.
Carla Pasternak, chief-strategist behindInvesting , found that
many of the largest private-equity firms onWall Street are
positioning themselves for what she calls "turnaround stories in
U.S. history." Home sales are up double-digits from 2011 and
homebuilder sentiment is at its highest level since 2006, according
to the National Association of Home Builders. The smartmoney is
coming back into real estate and this couldmean a huge opportunity
for investors like you and me.
The opportunity I'm talking about is in real estate investment
trusts (REITs), which are a great way for investors to add exposure
to the turnaround story and receive dividends to boot. The
opportunity I've found yields in incredible 7% -- and it's almost
as safe as investing intreasuries because of their unique tax.
These companies invest and manage real estate assets in specific
groups like retail, residential housing and commercial offices.
This way, investors are able to enjoy the benefits that come with
being alandlord -- dependable income andcapital appreciation
through rising housing prices -- but without the hassle of being a
And I found a REIT that owns 71 properties and about 10 million
rentable square feet. Better yet, the company earns almost 88% of
itsrevenue from long-term government contracts, making it a stable
Possibly the safest tenant in the world
Government Properties Income Trust (
is a REIT that buys and manages properties leased to government
tenants. The majority of its properties are leased to government
tenants with 68.2% of revenue from federal agencies, 17.5% from
state governments and 2.1% from the United Nations.
Rental income has surged 155% since 2005 to $179 million in 2011
as the company aggressively acquired properties with government
tenants. The leases are long-term and fairly stable, with an
average remaining tenant term of 4.9 years. In fact, the company
could lock-in itscash flow for longer periods, but chooses shorter
periods so it's able to increase rent periodically.
The total return on the shares since it began trading in 2009
has been 64.8%, or an annualized rate of 15.3%. That's more than
eight times the yield on the 10-Year Treasury bond, and about three
times the return of the S&P 500 during the same period.
Take a look at the chart below...
And in a turn of sweet irony, because of the company's status as
a REIT, it pays no incometaxes on the rent it collects from
government agencies like the Internal Revenue Service.
As a comparison, another player involved in commercial REITs,
Boston Properties (
pays adividend of more than 2% and has only increased rental income
by 26.4% to $1.7 billion since 2005. The company has a much higher
debt tocapitalization ratio of 53%, which tells me that Government
Properties has a safercapital structure or it could increase
returns by taking on more debt.
Risks to Consider:
Though the company signs long-term contracts with its
government tenants, there is a risk that reduced federal and state
spending could weaken its power to negotiate rent increases. Most
budget discussions should be concluded by May, but volatility in
the shares could be higher until then.
Action to Take -->
Dividend investors looking for high yields and safety should
look into Government Properties. There may be a few dips in share
price between now and the coming budget discussions due in March,
so investors now have a limited-time opportunity to snatch up the
stock at a lower price and enjoy even higher returns.