A REIT Backed By The Full Faith And Credit Of The U.S. Government

The U.S. government is the largest employer in the world and the largest office tenant in the U.S. DEA is the only internally managed REIT focusing on investing in U.S. government-leased buildings. The other direct peer is Government Properties Income Trust (NYSE: GOV), an externally advised REIT.

Summary

  • The term "full faith and credit" is used to describe the unconditional guarantee or commitment by one entity to back the interest and principal of another entity's debt.
  • This "full faith and credit" commitment is typically employed by a government to help lower the borrowing costs of a smaller, less stable government or a government-sponsored agency.
  • DEA has built a better mousetrap and I believe that's largely due to internal management.

Since my initial article on Easterly Government Properties (DEA) in 2015, shares have climbed over 27%:

The problem is, I did not buy shares in DEA at the time; I was maintaining a bit of cautious optimism, hoping for a pullback so I could pick up shares yielding 5.5%.

In August 2016, I decided to initiate a Buy on DEA, even though the dividend yield was slightly under 5%. I explained my thesis as follows,

DEA is no screaming Buy, but we believe the growth potential is solid. We are forecasting the company to increase its dividend by around 10%, and this should also drive total returns.”

I have continued coverage on DEA and I have been pleased with the progress of the company, and in a recent article I explained,

The term "full faith and credit" is used to describe the unconditional guarantee or commitment by one entity to back the interest and principal of another entity's debt. This "full faith and credit" commitment is typically employed by a government to help lower the borrowing costs of a smaller, less stable government or a government-sponsored agency.”

It is generally accepted that the U.S. government will never default on its loan obligations and these words "full faith and credit" have tremendous value as the phrase describes the unconditional guarantee or commitment behind America's credit quality.

Easterly Government May Be The Gold Standard

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