Easterly Government Stock Has 20% Upside Potential
Back in September, the U.S. Federal Reserve hiked its benchmark federal funds rate, which directly impacts interest rates, for the first time in three years, by 25 basis points, or a quarter percent, to a range of 3.75% to 4.00%. (Source: “Fed approves interest rate hike, signals one more to come this year,” CNBC, September 16, 2026.)
It signaled one more interest rate increase was coming this year. More could be on the way in 2027. Lorie Logan, the President of the Dallas Fed, said the Federal Reserve will need to increase interest rates at least two more times to get inflation under control. That would put the federal funds rate in a range of 4.25% to 4.50%. (Source: “Fed needs at least two more rate hikes, Logan says,” Reuters, October 30, 2026.)
When the economy is strong and inflation is heating up, the Fed raises interest rates to slow things down. Rising interest rates are great for savers, but not so great for those with debt or businesses that need to borrow.
And higher interest rates can be risky for capital intensive businesses like Real Estate Investment Trusts (REITs) that need to borrow money to increase their portfolio. After all, higher borrowing costs cut into profitability. In tough economic climates, there’s also concerns that tenants may not be able to pay their rent.
Neither is an issue for Easterly Government Properties Inc. (NYSE:DEA). Why? Easterly Government Properties can generate reliable cash flow, regardless of where we’re at in the economic cycle, because the U.S. Government is its biggest tenant. And if you can’t trust Uncle Sam to pay its bills, then who can you trust?
About Easterly Government Properties
Easterly Government Properties Inc is the leading owner, manager, acquirer, and developer of mission-critical U.S. Government leased real estate. In fact, according to the most recent data, a whopping 88% of Easterly Government Properties’ lease income is backed by the U.S. government. (Source: “Investor Presentation, September 2026,” Easterly Government Properties Inc, last accessed November 2, 2026.)
Its portfolio consists of 106 properties covering 10.7 million square feet (equal to 186 NFL fields). Of its properties 98% are fully leased with an annual lease income per square foot of $36.72.
The weighted average remaining lease term is 9.2 years. Having tenants that are willing to sign long-term leases adds stability to the company’s business. A government focuses portfolio also provides much more safety from cyclical conditions that can hammer the typical office space.
Moreover, leasing to the U.S. government has a high barrier to entry. The Department of Defense or FBI aren’t going to lease from just anybody. Some of the Federal tenancies within its portfolio include the Department of Veterans Affairs, FBO, U.S. Coast Guard, IRS, U.S. Judiciary (courthouses), Department of Homeland Security, and Joint Staff Command.
Since its inception Easterly has grown its portfolio from 2.1 million leases square feet to the current size of 10.7 million. There’s lots of room for growth. It’s currently tracking an estimated $1.5 billion of properties and actively evaluating around $500 million.
Core FFO Grows To $0.78/Share
For the third quarter ended September 30, 2026, Easterly announced that total revenue increased 8.6% to $93.61 million. (Source: “Easterly Government Properties Reports Third Quarter 2026 Results,” Easterly Government Properties, Inc., October 26, 2026.)
Third quarter net income jumped to $5.5 million, or $0.12 per share, from $1.2 million, or $0.03 per share in the same prior year period. Core funds from operations (FFO), a measure REITs use to represents cash flow, grew to $0.78 per share from $0.76 per share.
For the first nine months of the year, net income rose to $10.3 million, or $0.21 per share on a fully diluted basis. Core FFO increased to $112.5 million, or $2.33 per share.
Commenting on the results, Darrell Crate, President & CEO, said, “Despite continued volatility in the broader market, Easterly’s government-focused portfolio continues to provide stability and durability.”
Adding, “Our third quarter results reflect disciplined execution across the business and the strength of the platform we have built.”
Raises 2026 Guidance
For 2026, management raised the lower end of its guidance for 2026 Core FFO per share, on a fully diluted basis to a range of $3.08 – $3.13. It expects to report full year FFO per share, on a fully diluted basis, to $3.06 – $3.11.
Declares Quarterly Payout of $0.45/Unit
REITs are great because they have to legally distribute at least 90% of all taxable income to shareholders in the form of a dividend. When it comes to the health of a REIT, it’s important to look at Core FFO, it provides a better picture of a REITs recurring income than net income.
In the third quarter it announced Core FFO of $0.78 per share and a quarterly dividend of $0.45 per share, or $1.80 per share on an annual basis, for a current forward yield of approximately eight percent.
DEA Stock Has 20% Upside Potential
DEA stock performed well for much of 2026, hitting a new 52-week high of $25.49 on July 17. It was actually its highest trading level since January 2025. It has given up some ground since then, currently trading near $22.50.
Despite the slight pull back, DEA stock continues to have great upside, with Wall Street providing a 12-month share price target range of $25.00 to $27.00. This points to potential gains of approximately 14% to 20%.
Chart courtesy of StockCharts.com
The Lowdown on Easterly Government Properties, Inc.
Easterly Government Properties is a great REIT with a rock-solid tenant base; 88% of its lease income is backed by the U.S. government. As a result, it clearly doesn’t have an issue with rising interest rates and tenants paying their rent.
This helps it generate reliable cash flow which allows it to make accretive acquisitions and pay a reliable dividend.
This also bodes well for DEA shareholders, including the 380 institutions that hold 81.0% of all outstanding shares. The three top holders are Blackrock Inc, Vanguard Group, and State Street Corporation. (Source: “Easterly Government Properties, Inc. (DEA),” Yahoo! Finance, last accessed November 2, 2026.)
For information and education only; not investment, tax or legal advice. Yields and prices are as of the publication date.
