Here Are 2 REITs With Distribution Yields Of More Than 8%

Credit: Simon Cunningham

It’s not a secret that interest rates are low in Singapore and many parts of the word. Some investors and market commentators believe that this has pushed up valuations of companies, hence resulting in low dividend yields.

Thing is, not every listed entity in Singapore’s stock market have low yields. I had used a stock screener provided by bourse operator Singapore Exchange Limited (SGX: S68) to find real estate investment trusts with a yield of more than 8%.

Many REITs popped up, but let’s take a look at two that I’ve randomly selected: Frasers Hospitality Trust (SGX: ACV) and Viva Industrial Trust (SGX: T8B).

Source: SGX Stock Facts and Yahoo Finance

Frasers Hospitality Trust is a stapled trust that currently has 14 hotels and serviced residences in its portfolio that are located in eight cities around the world, including Singapore, Sydney in Australia, Kobe in Japan, and London in the United Kingdom.

These properties have over 3,500 rooms (76% are hotel rooms and 24% are serviced residence units) and include hotels such as InterContinental Singapore and The Westin Kuala Lumpur.

In Frasers Hospitality Trust’s last reported quarter (the three months ended 30 June 2016), it reported a 3% year-on-year decline in its distribution per stapled security. It also has a gearing ratio of 38.3% and saw its book value per stapled security slide by 5.1% from a year ago.

Meanwhile, Viva Industrial Trust is a stapled trust with a focus on investing in industrial properties and business parks. The trust has a portfolio of eight properties right now, which are all located in Singapore. Some of them are UE BizHub EAST and Viva Business Park.

Viva Industrial Trust saw its distribution per stapled security step down by 5.4% year-on-year in its latest quarter (again, the three months ended 30 June 2016). The trust’s book value per stapled security also dipped by 2.8%. Viva Industrial Trust ended the second-quarter of 2016 with a gearing ratio of 40.0%.

The two REITs mentioned above may have fat distribution yields. But it is worth noting that the yields alone tell us nothing about whether they can sustain their distributions going forward. Investors need to dig into the REIT’s fundamentals before coming to any investment decision.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.