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Do You Know These 2 REITS Have Distribution Yields Of More Than 8%?

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: Cambridge Industrial Trust (SGX: J91U) and IREIT Global (SGX: UD1U).

cambridge-industrial-trust-and-ireit-global-pb-and-yield-table-lawrence
Source: SGX Stock Facts and Yahoo Finance

Cambridge Industrial Trust, as its name suggests, focuses on industrial properties. Right now, its portfolio consists of 50 properties located across Singapore that have a collective gross floor area of 8.4 million square feet and value of S$1.4 billion (as of 30 September 2016). These properties are used for logistics, warehousing, light industrial activity, general industrial activity, and more.

The company’s latest results (for the three months ended 30 September 2016) were released just last week. It saw its revenue and distribution per unit fall by 2.9% and 18%, respectively, compared to a year ago.

In its earnings release, Cambridge Industrial Trust commented that it expects its results for the fourth-quarter of 2016 “to be negatively impacted” given the difficult market conditions and expired and expiring master leases.

The next on the list is IREIT Global, which listed only in August 2014 and touts itself  as the first Singapore-listed REIT that focuses on commercial properties in Europe. At the moment, IREIT owns five properties in its portfolio and all of them are located in German cities (Berlin, Bonn, Darmstadt, Munster and Munich).

IREIT Global’s latest earnings are for the second-quarter of 2016. The REIT actually saw strong growth – gross revenue soared by 57.4% while the distribution per unit climbed by 45.5%. But in the earnings release, the REIT warned that “Germany’s economy has experienced a decline” after a solid performance in the first-quarter of the year. The occurrence of Brexit had also led to uncertainty in Europe.

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.