Dividend Watch: The Government Pays You, Really (GOV)

It is time for The Daily Dividend, and we have one that every investor should care about.  There is a way to make money off of Uncle Sam and off of your local governments.  Investors use REITs for high dividends, so what about a real estate investment trust that owns office properties leased to and used by government tenants.  This is where Government Properties Income Trust (NYSE: GOV) comes into play.

Early this morning came news that Government Properties was raising its quarterly dividend payout from $0.41 to $0.42 per common share.  The annualized move goes from $1.64 to $1.68.  You might ask why this matters since it is only a penny hike.  This one has traded only since mid-2009 and its trading range is effectively $19 to $28 since coming public.  The market cap is close to $1.1 billion and Thomson Reuters has a consensus analyst price target of about $28.30.

The first dividend was $0.50 in October 2009, but it then fell to $0.40 but only for two quarters.  We then had three consecutive quarters of $0.41 per quarter and now we are looking at $0.42 per quarter.  With shares at almost $27.00, the new dividend rate is 6.2%.  How high are Treasury yields?  The 10-year Treasury yields about 3.43% and the 30-Year yields about 4.49%.  Whether or not you get capital gains ahead is a risk, but Government Properties pays you about 6.2% currently and it can have stock market upside.

The company says in its site, “Most of our properties have been continuously occupied by government tenants since the properties were first acquired, developed or redeveloped.” It is also listed as investment grade by both Moody’s (Baa3) and S&P (BBB-).

As of December 31, 2010, Government Properties Income Trust owned approximately $793 million of office properties with approximately 6.8 million square feet located in 25 states and Washington, D.C.  Its “same property results” from December 31, 2010 shows that of the 3.625 million square feet that 100% of that is leased.  Of the total 6.803 million square feet, the REIT listed its 2010-end leased space rate of 6.536 million square feet or effectively what is a 96.1% occupancy rate.


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