The idea to take on more risk has been sacrosanct among investors since the Dutch East India Co. issued the first publicly available shares more than 400 years ago. To this day, most financial advisors build their client portfolios around a combination of stocks, bonds and commodities, depending on how much these clients need at retirement and how much risk they’re are willing to take.#-ad_banner-#

At least, that is the idea behind most investments.

But if you want a higher return, then you have to take more risk.

A “safe” asset such as the 10-Year Treasury bond, for example, won’t do a lot for your portfolio. It’s known to be “risk-free,” because it is assumed that the U.S. government will always pay its debts. The yield on the bond is used as a measure for all other risky assets, including stocks, bonds or commodities. But the “risk-free” bond yields a measly 2%, while corporate bonds and blue-chip stocks don’t yield much more either.

So what if I told you I found a stock that can add market-busting returns to your portfolio with less risk than you might suspect?

Here’s the story…

Beyond stocks and bonds, real estate has made more people wealthy throughout history than any other investment. And not more than a couple of centuries ago, you needed to own property to have many of the freedoms and rights we enjoy today.

Carla Pasternak, chief-strategist behind High-Yield Investing, found that many of the largest private-equity firms on Wall Street are positioning themselves for what she calls “one of the most dramatic turnaround stories in U.S. history.” Home sales are up double-digits from 2011 and homebuilder sentiment is at its highest level since 2006, according to the National Association of Home Builders. The smart money is coming back into real estate and this could mean a huge opportunity for investors like you and me.

The opportunity I’m talking about is in real estate investment trusts (REITs), which are a great way for investors to add exposure to the turnaround story and receive dividends to boot. The opportunity I’ve found yields in incredible 7% — and it’s almost as safe as investing in treasuries because of their unique tax.

These companies invest and manage real estate assets in specific groups like retail, residential housing and commercial offices. This way, investors are able to enjoy the benefits that come with being a landlord — dependable income and capital appreciation through rising housing prices — but without the hassle of being a landlord.

And I found a REIT that owns 71 properties and about 10 million rentable square feet. Better yet, the company earns almost 88% of its revenue from long-term government contracts, making it a stable cash-flow machine.

Possibly the safest tenant in the world
Government Properties Income Trust (NYSE: GOV) is a REIT that buys and manages properties leased to government tenants. The majority of its properties are leased to government tenants with 68.2% of revenue from federal agencies, 17.5% from state governments and 2.1% from the United Nations.

Rental income has surged 155% since 2005 to $179 million in 2011 as the company aggressively acquired properties with government tenants. The leases are long-term and fairly stable, with an average remaining tenant term of 4.9 years. In fact, the company could lock-in its cash flow for longer periods, but chooses shorter periods so it’s able to increase rent periodically.

The total return on the shares since it began trading in 2009 has been 64.8%, or an annualized rate of 15.3%. That’s more than eight times the yield on the 10-Year Treasury bond, and about three times the return of the S&P 500 during the same period.

Take a look at the chart below…

And in a turn of sweet irony, because of the company’s status as a REIT, it pays no income taxes on the rent it collects from government agencies like the Internal Revenue Service.

As a comparison, another player involved in commercial REITs, Boston Properties (NYSE: BXP), pays a dividend of more than 2% and has only increased rental income by 26.4% to $1.7 billion since 2005. The company has a much higher debt to capitalization ratio of 53%, which tells me that Government Properties has a safer capital structure or it could increase returns by taking on more debt.

Risks to Consider: Though the company signs long-term contracts with its government tenants, there is a risk that reduced federal and state spending could weaken its power to negotiate rent increases. Most budget discussions should be concluded by May, but volatility in the shares could be higher until then.

Action to Take –> Dividend investors looking for high yields and safety should look into Government Properties. There may be a few dips in share price between now and the coming budget discussions due in March, so investors now have a limited-time opportunity to snatch up the stock at a lower price and enjoy even higher returns.