Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15
Stock Traders Flock to Gold GLD ETF - 24th Jan 15
10 Reasons Why You Need an Offshore Bank Account - 24th Jan 15
Goldman Sachs Blankfein - Regulation is Like Background Noise - 24th Jan 15
Gold in Euros Surges As ECB To Print Trillion Euros and Greek Election This Sunday - 24th Jan 15
Gold Bear Market Rally or New Bull ? - 24th Jan 15
Euro-zone 'QE already Working' Says IMF Lagarde - 23rd Jan 15
ECB and EU LTRO and QE for Dummies: Or, Make These Trades - 23rd Jan 15
Debt and Deflation: Three Financial Forecasts - There's More Than Falling Prices - 23rd Jan 15
Market Should Not Doubt' Mario Draghi ECB QE - 23rd Jan 15
Francs, Bonds, Barrels, and Bail-Ins - 23rd Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

How to Make the IRS Pay YOU 7.4% Interest Using REITs

Companies / Investing 2013 Dec 31, 2012 - 06:28 AM GMT

By: DailyWealth

Companies

Dr. Steve Sjuggerud writes: What business will never go out of business?

What business will never be shut down by the government?

"In this world, nothing can be said to be certain, except death and taxes," Benjamin Franklin wrote in 1789. He knew the business I'm talking about...


The business of government tax collection – the Internal Revenue Service (IRS) – will never go out of business. Your business may succeed or fail... But the IRS will live on.

And some investors are getting the IRS to pay them 7.4% a year...

I know what you're thinking... The IRS you know takes one-third of your income each year. It doesn't pay you an income – right? But they're one and the same. It's the huge opportunity that we have today...

Who does the IRS pay when it rents an office building? Is it the federal government? No, actually – the IRS has a landlord. It's called Government Properties Income Trust (NYSE: GOV).

GOV is a business that rents the buildings it owns to the government. And the IRS is GOV's biggest tenant (measured by square footage). The next-biggest tenant is U.S. Customs & Immigration. Together, they make up over 20% of GOV's rental income.

None of these "businesses" are going out of business. These departments of the federal government will be around a decade and even a century from now.

GOV takes advantage of it by becoming the government's landlord. And smartly, it pays no income taxes on the rent it earns...

You see, GOV is a real estate investment trust (REIT). As a REIT, it has a special tax status, where it doesn't have to pay income taxes on the rent it collects. Instead, it passes along nearly all the rental income it earns to you, in the form of dividends. As long as it passes its rent along to you, it can keep this special tax status.

As I write, GOV pays a hefty 7.4% dividend. That's an incredible dividend in our zero-percent world. And thanks to GOV's long-term contracts, it's safe!

You see, GOV is successfully locking in very long-term leases at rates above 8% – to government tenants that are not likely to default. GOV also protects itself by building in inflation adjustments and property tax adjustments if either of those gets out of line as well. GOV has it covered. Your dividend is safe.

Investors should bid up shares of GOV going forward. Its 7.4% dividend is very attractive in a world of zero-percent interest on bank deposits.

The other thing GOV has going for it is that "cap rates" on commercial real estate are near 5.5%. The "cap rate" is the annual return on an investment building from your rent – after expenses. In short, it is the rent – after expenses – divided by the building's cost. (It is the most commonly quoted figure in rental real estate.)

If cap rates are near 5.5%, investors should be willing to pay more for GOV's portfolio that has a built-in yield of 7.4%. Investors will push the share price of GOV up. At a 5.5% cap rate, the fair value of GOV's shares would be 30% higher than today.

Going forward, GOV should have no problem paying – or even increasing – its dividend. That's a big reason why the company is a buy in my True Wealth newsletter.

So if you're looking for a safe place to earn high yields, how about making the IRS pay you 7.4% a year?

Good investing,

Steve

IMPORTANT NOTE: GOV shares are thinly traded. So if you buy, make sure you use a limit order. This lets you determine the price you're willing to pay... and you won't get stuck chasing the stock higher because your trade won't go through if shares are trading above it. And don't pay more than 1% or 2% over Friday's closing price.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2011 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014