Summary
- High yield and low risk are an uncommon pairing in the stock market.
- I detail one such occurrence where an unusual divergence creates a lucrative opportunity for income investors.
- Boston Properties preferred shares yield 6% and are trading with a 13% discount to their par value.
As a conservative income investor, I seek securities that offer a compelling mix of high yield and low risk. Unfortunately, the market rarely serves an appetizing platter offering them both up at once. You don’t get to devour cheesecake and have it digest like a salad. You pick your poison.
You either accept greater risk for a juicier yield, or you sacrifice yield for a safer play. The stock market is efficient enough to price securities accordingly. When mispriced opportunities materialize, they rarely last long.
Fortunately for you and I, "last long" can entail just enough time to swing by and scoop up shares before the weighing machine of the market corrects the discrepancy. Let me highlight one such opportunity hiding in plain sight.
Boston Properties (BXP) is one of the largest owners of Class A office properties in the country. You may have read about it recently when it unveiled the new Salesforce Tower in San Francisco. The building is remarkable, as it’s the tallest rooftop west of Chicago. Salesforce (NYSE:CRM) signed a 15.-year lease back in 2014 which granted it naming rights over the building during that period. Quotes from both Salesforce and Boston Properties indicate that the relationship between landlord and tenant has been very collaborative and cooperative.
