Whether you agree or disagree with President Trump's hard-line immigration stance, his border crackdown is a fact of life that's unfolding with greater urgency every day.
We've found an income play on this trend, and you may be surprised to learn that it's a real estate investment trust (REIT).
Easterly Government Properties (DEA) stands to benefit from the new administration's increased immigration activities because U.S. government agencies lease most of the space in Easterly's more than 40 properties. With 97% of its income backed by Uncle Sam, it's a safe bet that this REIT's tenants will stick around.
That's especially true now that the Immigration and Customs Enforcement (ICE) agency and the FBI are Easterly's main tenants, accounting for more than a quarter of the REIT's income.
Because of these tenants' security concerns, their space must be designed to strict specifications, so they can't just move on a whim. And these days, of course, ICE is quite busy indeed.
With a market cap of $967.8 million and based in Washington, DC, Easterly Government Properties' main point of contact with tenants is the General Services Administration. All of the REIT's properties are currently leased for seven-year terms.
The REIT's management has been turning in solid funds from operations (FFO) growth through a series of property acquisitions. Most of those properties were already occupied by a law enforcement agency, while the rest were owned by some other government agency.
Given its track record of successful acquisitions and the government's tendency to lease rather than buy space, it's a safe bet management can find more profitable deals. The current dividend yield is a robust 4.69%.
REITs in general make sense for investors who seek a steady stream of income.
Conventional wisdom says that higher interest rates are generally bad for REITs, but over the past 12 months, REITs as a whole have held their own. The iShares U.S. Real Estate ETF (IYR) and the Vanguard REIT ETF (VNQ) are up 7.5% and 5.8%, respectively. Rather than obsessing about the Federal Reserve's next move, you're better off focusing on the quality of a prospective REIT investment.