$621.5 Billion on the Table for This Government-Backed REIT

Kristin Orman By Kristin Orman
Research Analyst, The Oxford Club

Market Trends

Saving for retirement is a lot like national security…

It requires a strong offense to create it. And it takes an even stronger defense to protect it.

When it comes to your dividend investment strategy, you must first go on the offensive and choose stocks with growing dividends. Then you have to go on the defensive to protect your income. You have to make sure your stable of growing dividends is sustainable.

Of course, there are no 100% guarantees when it comes to dividends. Companies can slash or eliminate them at any time.

But the dividend of one real estate investment trust (REIT) comes close. It leases most of its properties to government agencies or contractors.

Better still, Uncle Sam, with his AAA credit rating, is signing the rent checks.

Cashing In on Defense Checks

Corporate Office Properties Trust (NYSE: OFC) is a REIT that buys and leases properties to the federal government and its contractors like Boeing Co. (NYSE: BA). It has a dividend yield of 3.1%.

It has 152 office properties in its portfolio. And 94.2% of its space is leased.

Nearly 87% of its revenue comes from defense and IT locations. Meanwhile, just 13% comes from regional office properties.

That means that Corporate Office Properties Trust is almost guaranteed to be paid the vast majority of its rent. And, barring a government shutdown, it’ll be paid on time.

National defense is a top priority of the government. And on Monday, U.S. lawmakers made it an even bigger one.

Congress said it wants to add $18.5 billion to the 2018 defense budget. That would bring the proposed budget to $621.5 billion.

(Republican Mac Thornberry – an influential House committee chairman – is pushing for an even bigger defense budget of $696.5 billion.)

Much of the budget will go toward hiring more troops and buying more aircraft and ships.

And that’s good news for Corporate Office Properties Trust…

While the funding of many government agencies is on the chopping block, this sector is expecting massive increases. It will need more office space, not less.

So Corporate Office Properties Trust’s occupancy rate should remain near 100%. That means that the rent checks will continue to roll in.

Funds from operations (FFO) are a REIT’s cash flow. This year, analysts expect Corporate Office Properties Trust’s FFO to jump 12.3%, from $1.82 per share in 2016 to $2.04. And it should jump another 6.7% in 2018.

Since dividends are paid from cash, as FFO increases, the dividend should, too.

This makes Corporate Office Properties Trust one of the most “defensive” income plays out there.

The Thing About Guarantees

Over the years, I’ve been pitched a countless number of crazy “sure thing” investments by dozens of commission-hungry brokers. Most of them would never be considered even remotely safe.

But companies like Corporate Office Properties Trust are almost as good as you can get.

In the world of investing, the “sure thing” is the elusive unicorn… It doesn’t exist. But with the right strategy, sometimes you can get pretty close.

Sometimes the best offense is a good defense.

Good investing,


P.S. Monday’s budget proposal will undoubtedly boost the bottom lines of defense contractors. And Chief Income Strategist Marc Lichtenfeld saw it coming… Several months ago, Marc began developing a trading service that uses “Stock Sonar” – a patent-pending formula that targets triple and quadruple-digit gains. To learn more about his military-grade system, click here now.