Real estate investment trusts (REITs) have been a popular investment choice of late. Not only do they provide investors with relatively high distribution yields, REITs also have the capacity to appreciate in value. Furthermore, REITs in Singapore are required to pay at least 90% of their distributable income to unitholders to quality for tax exemptions. This means that investors can enjoy regular and predictable distributions over the years.
With that, let’s take look at three REITs that have a distribution yield of more than 8% (as of 4 April 2018).
1. Lippo Malls Indonesia Retail Trust (SGX:D5IU) currently has the highest distribution yield among the REITs in Singapore at 9.1%. It owns a portfolio of 23 retail malls and seven retail spaces located in four major cities in Indonesia. In 2017, the trust managed to grow its distributions per unit (DPU) by 0.9% from the previous year. As of 31 December 2017, it had a gearing ratio of 33.7%. At its last transacted price of S$0.38 per unit, the trust trades at 0.91 times its book value.
2. Viva Industrial Trust (SGX:D5IU) is the second highest yielding REIT at the moment. It focuses on investing in business parks and other industrial real estate in Singapore. The REIT currently has a portfolio of nine assets in Singapore worth S$1.29 billion. In 2017, Viva Industrial Trust managed to increase its distributions per stapled trust by 7.4% to 7.47 cents per security. At its current price of $0.875 per security, the trust has a trailing distribution yield of 8.5% and a price-to-book ratio of 1.14 times.
3. EC World Real Estate Investment Trust (SGX:BWCU) is the third highest yielding REIT at the moment with a trailing distribution yield of 8.2%. The trust was listed in 2016 and has a portfolio of seven properties in China that are used for e-commerce, supply chain logistics and other specialised logistics purposes. The trust managed to beat both its revenue and distribution forecast in 2017 by 1% and 1.5% respectively. It currently has a gearing ratio of 29.2%. At a price of S$0.735, the REIT has a price-to-book ratio of 0.8 times.
A Foolish conclusion
Distributions are, without a doubt, one of the main reasons to invest in REITs. A REIT that has a high distribution yield will, therefore, seem a very attractive proposition. However, distribution yields are just one aspect of the REIT that we should look at. Beside its distribution yield, investors need to assess if the REIT has a resilient portfolio and stable balance sheet to maintain or even increase its distributions in the future. Only by looking at all the aspects of the REIT can we truly make a good 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. Motley Fool Singapore contributor Jeremy Chia owns units in EC World Real Estate Investment Trust.