Earning passive income is one of the keys to becoming definitively independent. Once your income from passive activities exceeds your expenses, you can stop working actively to make money.
However, passive income must be sustainable in order to remain financially independent. Those who want to secure their passive income on a consistent basis should consider Characteristics of the eastern government (DEA -0.34%). real estate investment fundRit) focuses on the leasing of mission-critical real estate to the United States government. With rental income backed by full faith and credit from the US government, this REIT should have no problem paying its dividends in the future.
Taking security to another level
Many REITs own buildings that are leased to US government agencies. The federal government is the largest employer in the world and the largest tenant of offices in the country. Moreover, the government is among the highest quality tenants because they always pay the rent. This makes government rental properties one of the safest investments.
Easterly Government Properties takes the integrity of the US Government as a tenant even further. This is amazing REIT . office Focuses on leasing high-quality space to mission-critical government agencies. This three-pronged focus on agency (growth and importance), mission (essential and requires specialized space), and construction (strategic location and built-to-fit design) further enhances the long-term security of rental income.
Currently, Easterly Government Properties owns 89 properties of 8.6 million square feet that are leased at 99% with a weighted average remaining rent of 9.7 years. REIT properties include offices (67% of its leased square foot area), outpatients (15%), laboratory (7%), court/office (4%), and other (including warehouse and manufacturing) (7%). Leases on these buildings will provide the company with $2.6 billion in rental income over their term, backed by the full faith and credit of the US government.
This strong rental income provides a significant boost to Easterly 5.6% –return. A real estate investment trust (REIT) also enhances the safety of dividends with a healthy balance sheet and a sustainable dividend ratio of less than 80% of the FFO.
Layering in Additional Streams of Fixed Income
Easterly’s existing portfolio should provide the REIT with a steadily increasing rental income. The lease structure features inflation-linked adjustments to cover higher property taxes and operating expenses. Meanwhile, there is a possibility to increase additional rental income upon renewal. Due to the mission-critical nature of properties built to suit the needs of tenants, Easterly can raise rents on renovation to higher rates based on market rates or a higher replacement cost of the building.
REIT has two other drivers of growth: acquisitions and development. Easterly has a long history of sourcing real estate essential to the mission of select government agencies. For example, she recently purchased an FBI field office in Tampa from a fellow REIT office. Highwoods خصائص properties (HIW) -1.68%) $70.4 million. Highwoods built this property specifically for the FBI in 2005, which signed a long-term lease renewal in 2020. The deal will help Highwoods pay off debt used to purchase a batch of office properties last year while providing Easterly with another high-quality government building. REIT also recently acquired a building-to-wing repository that is leased to the Natural Archives and Records Administration.
Meanwhile, the REIT formed a joint venture last year to acquire 10 properties leased to VA on a rolling basis through the end of next year. The joint company recently purchased its sixth ownership as part of that deal.
Easterly will also selectively develop purpose-built properties for the benefit of the United States Government. It is currently building an FDA laboratory in Atlanta, which should be completed by the second quarter of 2024. It will serve as one of the FDA’s 13 regional laboratories.
Increased rental income from its existing portfolio and additional rental flows from new properties would enable Easterly to pay a steadily increasing dividend. Its dividend has increased orientally in the past year, one of the many it has offered investors over the years. The REIT also recently allowed the buy-back of up to 5% of its outstanding shares. A lower number of shares means that it will pay dividends in the future via fewer shares, which enhances its payout.
A bond-like investment with stocks rising
Since Easterly’s focus on owning mission-critical government buildings enables it to generate bond-like income, it can pay attractive dividends, currently yielding more than 5%. REIT also provides some positive potential from increased rental yields, acquisitions and development projects, further supporting its dividend payout. These factors make Easterly a potentially attractive option for investors looking for a low-risk passive income stream.