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In This Government REIT, Investors Can Trust

NEW YORK ( TheStreet) -- While longer-term rates like the 10-year Treasury bond "soar" (yes, I'm being facetious) to shocking levels like 2.45%, the market is giving dividend-hungry investors a long-awaited chance to capture higher yields on REITS with quality tenants.

One that stands out and is "on sale" is Government Properties Income Trust (GOV - Get Report). The name alone suggests that this real estate investment trust has tenants that have the power to print money when they need to pay the rent.

As of March 31, Government Properties owned $1.7 billion in office properties, comprising 10 million square feet in 31 states and Washington D.C. The company says that about 75% of its rental income comes from properties leased to the U.S. government.

In addition, 21% of its rental income is paid by state governments and 4% by the United Nations.

The dividend at Thursday's closing share price of $23.36 translates to a 7.36% yield, well above the average REIT yield. Plus, government tenants have a historically high renewal rate with an average occupancy of 26 years.

Government Properties Income Trust is managed by Reit Management & Research LLC, a private company founded in 1986 to manage public investments in real estate. As of March 31, RMR managed a large portfolio of publicly owned real estate in North America, including 1,700 properties in 46 states; Washington, D.C.; Puerto Rico; and Ontario, Canada.

Governtment Properties has a buy rating from TheStreet Ratings which commented on the REIT on Thursday: "The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, expanding profit margins, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Looking at Government Properties' one-year price chart helps demonstrate why its shares now look tempting, closing on Thursday at $23.46. I've included the Free Cash Flow Yield line to illustrate how steady that metric has been. The stock price is approaching the lows of last November. GOV Chart GOV data by YCharts
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