Are These High-Yielding Trusts Worth Looking At?

With interest rates at generational lows, yields are hard to come by for income investors nowadays.

But, a quick search around the Singapore stock market show that some high-yielding trusts still exist today. Some of them even have distribution yields of more than 10%! I’d be taking a closer look at two such trusts to see if their yields are too good to be true.

The pay-TV business

First up, we have Asian Pay Television Trust (SGX: S70U), a business trust that is currently focused on pay-TV and broadband businesses in Taiwan.

Based on its unit price of S$0.51 at the moment, Asian Pay Television Trust has an annualized distribution yield of 12.7% based on its latest distributions for its current financial year ending 31 December 2017.

The trust’s yield looks high, but things might not be looking great for its business. In the trust’s latest earnings release, management warned of a weak market in Taiwan and the possibility of declining basic cable TV rates in 2016.

Moreover, the trust would be accelerating its capital expenditure plans due to cable TV law amendments in Taiwan. Given that the trust is paying out 100% of its earnings, the increase in capex could be a worrying sign. In fact, Asian Pay Television Trust’s distribution in the first-half of 2016 is already down by 19% from a year ago.

The industrial REIT

Another trust that has a very high yield at the moment is Sabana Shariah Compliant REIT (SGX: M1GU). The REIT, which focuses on owning industrial properties in Singapore, has an annualized distribution yield of about 9.7% at its current unit price of S$0.53.

However, in a similar manner to Asian Pay Television Trust, Sabana REIT has seen a significant decline in its distribution in recent times – the trust’s distribution per unit fell by 28.5% year-on-year in the first-half of 2016. For a longer-term perspective, Sabana REIT’s distribution of S$0.024 per unit in the second-quarter of 2013 had shrunk by nearly half to S$0.0123 per unit in the second-quarter this year.

The trust’s overall net property income has been struggling in recent quarters due to negative rental reversions on its properties. The trust also saw a huge impairment on its property value which cost it to fall into losses in the second-quarter of this year.

Foolish Summary

So there we have it, two trusts with high yields. Although it is possible to find trusts or stocks with very high yields in the market today, we have to know that most of the time, these trusts and stocks are trading cheaply for a reason. Thus, it is important for us to know what we are investing in and not just be enticed by high yields alone.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.