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Your Quick Dividend Guide To Ascendas Real Estate Investment Trust

Every income investor would like to own a stock that pays a growing dividend that is sustainable. But finding a good dividend real estate investment trust (REIT) requires some homework.

Ascendas Real Estate Investment Trust (SGX: A17U) is the largest REIT listed on the Singapore market with a market capitalisation of S$7.7 billion. The REIT has a long history and was listed on the Singapore stock exchange on 2002.

Ascendas REIT has a sprawling portfolio which encompasses 100 98 properties in Singapore, 31 35 properties in Australia and 38 properties in the United Kingdom. Most of its properties serve the industrial and business space needs of companies which come from a wide range of industries such as life sciences, information technology and financials. With such a large asset base producing income for the REIT, let’s take a look at its distributable income and distribution per unit (DPU).

Source: Ascendas REIT F17/Y18 Annual Report

Ascendas REIT has seen a consistent increase in its distributable income over the past five fiscal years.

Looking at the graph, we can see that the REIT has been able to increase its distributable income from S$342 million in the financial year ended on 31 March 2014 (FY13/14) to S$468 million in FY17/18, or an increase of 8.2% per year. Over the same period, the REIT’s distribution per unit (DPU) increased from 13.74 14.24 cents to 15.74 15.99 cents or an increase of 3.5% 2.3% per year. The slower growth of the DPU is, in part, due to the increase in units which can be seen in the diagram on the right; The number of units over the same period increased from 2.403 billion to 2.929 billion.

Moving on, let’s look at the REIT’s debt profile.

Source: Ascendas REIT FY18/19 Q1 Presentation

The REIT’s total debt stood at S$3.7 billion as of 30 June 2018, with an aggregate leverage of 35.7%. All-in funding cost was 2.9% and Ascendas REIT had a weighted average debt to maturity of 3.4 years. Meanwhile, 72.4% of its debt was on fixed rates, adding stability against rising interest rates. The REIT’s interest coverage ratio came in at 5.6 times, which suggests that Ascendas REIT will be able to cover its interest expenses going forward. Elsewhere, the REIT’s debt profile is also well spread out, indicating that the manager should be able to manage its debt refinancing when it comes due.

Source: Ascendas REIT F17/Y18 Annual Report

To close, the REIT’s net asset value (NAV) has increased modestly over the past five fiscal years moving from S$2.02 in FY13/14 to S$2.12 in FY17/18. The NAV reflected in the graph represents the NAV prior to distribution adjustments.

Ascendas REIT has been on an acquisition spree over the last few years, adding an Australian portfolio and logistic warehouses from the UK. The acquisitions could be one reason for the slow increase in the REIT’s NAV as Ascendas REIT has had to issue new shares to acquire the aforementioned properties. On the bright side, a move out of Singapore might be beneficial for the REIT over the long term as its geographical expansion enables the REIT to grow.

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[Editor's note: the article above has been updated on 19 October to correct the DPU and number of properties under its portfolio]

The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore has recommended shares of Ascendas REIT. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.