Real estate investment trusts (REITs) and stapled trusts are investment vehicles that invest in a portfolio of income-producing real estates. Besides its requirement to distribute at least 90% of distributable income, REITs also enjoy tax benefits that other property stocks do not. As such, unitholders enjoy stable and consistent distributions each year. Many of the REITs also offer distribution reinvestment schemes, allowing unitholders to easily reinvest their distributions. This has made REITs and stapled trusts one of the most popular investment vehicles in Singapore.
The popularity of REITs and stapled trusts in Singapore has led more of them to choose to list here. There are now 34 REITs and six stapled trusts in Singapore, giving investors here a multitude of options. Here are five interesting things to know about the REIT market in Singapore now.
REITs have an average distribution yield of 6.7%
According to a recent report by Singapore Exchange Ltd (SGX:S68), the 40 REITs and stapled trusts in Singapore averaged an attractive distribution yield of 6.7%, as of 6 July 2018. This is higher than government bonds that have yields between 0.25% and 4%. It is also higher than the Straits Times Index‘s (SGX: ^STI) dividend yield of 3.04% for 2017.
The five highest yielding trusts
The report also showed that the five highest yielding trust were Lippo Malls Indonesia Retail Trust (SGX:D5IU), Viva Industrial Trust (SGX:T8B), Cache Logistics Trust (SGX:K2LU), Soilbuild Business Space REIT (SGX:SV3U) and EC World REIT (SGX:BWCU). On average, these trusts have a yield of around 8.8%.
Institutional investors have been net buyers of trusts
According to another report by SGX, institutional investors have been net buyers of REITs and stapled trusts over the past three weeks. Last week, CapitaLand Mall Trust (SGX:C38U) and Ascendas Real Estate Investment Trust (SGX:A17U) were among the top 10 stocks with highest net buy by institutional investors.
The three REITs that performed the best over the last 12-month period
The three trusts that returned the most over the last 12-month period were Keppel DC REIT (SGX:AJBU), Mapletree North Asia Commercial Trust (SGX:RW0U) and Mapletree Industrial Trust (SGX:ME8U). They returned 14.1%, 13% and 12.7% respectively. The average total return over the last 12 months was 2.6%.
Best-performing REITs year-to-date
Year-to-date, the three best performing trusts were Sabana Shariah Compliant REIT (SGX:M1GU), Cromwell European REIT (SGX:CNNU) and AIMS AMP Capital Industrial REIT (SGX:O5RU). They returned 14.7%, 7.3% and 3.2% respectively.
Despite having the highest trailing distribution yield, Lippo Mall Indonesia Trust performed the worst both year-to-date and over the last 12-month period with a -17.9% and -24.9% return respectively.
The Foolish bottom line
Because of their structure, REITs and stapled trusts provide consistent and visible distributions to investors each year. Moreover, they are much easier to invest in and have fewer hidden costs than investing in physical properties. This has made REITs and stapled trusts popular among Singapore investors.
Worried about the overall state of the market? Do you know the 1 thing you should never do in the stock market? The Motley Fool Singapore's new e-book lays out a plan to handle market crashes, details the greatest advantage you have as an investor, and looks at decades worth of market data to bring you the smartest insights on investing. You can download the full e-book FREE of charge--Simply click here now to claim your copy
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 a recommendation on Singapore Exchange, CapitaLand Mall Trust and Mapletree Industrial Trust. Motley Fool Singapore contributor Jeremy Chia owns units in EC World REIT and Keppel DC REIT.