Real estate investment trusts, or REITs, are popular investment choices on the Singapore stock market. That’s because REITs tend to have high distribution yields due to their need to distribute at least 90% of their taxable income to unitholders in order to enjoy tax transparency.
In this article, I will share with you three REITs that are trading at high distribution yields of more than 8%.
Source: SGX StockFacts
We will start with Cache Logistics Trust (SGX: K2LU). As a quick background, Cache Logistics Trust is a real estate investment trust that focuses on logistics properties. It currently has 27 logistics warehouse properties in its portfolio which are located in Singapore, Australia, and China.
In the quarter ended 30 September 2018, Cache Logistics Trust reported that gross revenue grew 14.8% to S$31.5 million while net property income increased by 8.1% to S$23.1 million. The improvement was driven by higher contribution from existing properties and latest acquisitions. Yet, the REIT’s distribution per unit (DPU) was down by 4.3% year-on-year to 1.475 cents, mainly due to lower income for distribution and issue of new units.
As of 30 September 2018, the REIT’s gearing stood at 35.6% and its committed occupancy rate was 96.9%.
Next, we have First Real Estate Investment Trust (SGX: AW9U). As a quick introduction, First REIT is a healthcare-focused REIT with a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea). The REIT’s sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.
For the quarter ended 30 September 2018, First REIT reported that gross revenue climbed 5.1% while NPI improved 5.4%, respectively, as compared to the same period last year. The improvement was primarily due to contributions from the newly-acquired Siloam Hospitals Buton & Lippo Plaza Buton, and Siloam Hospitals Yogyakarta, as well as increased rental income from existing properties. Consequently, the REIT’s DPU came in at 2.15 cents, 0.5% higher than the same period last year.
Victor Tan, chief executive of First REIT’s manager, made the following comments:
“Contributions from our latest acquisitions and existing properties continued to bolster the Trust’s revenue and NPI in the third quarter. The proposed acquisition of Bowsprit by OUE Lippo Healthcare Limited will be one of our growth drivers. First REIT will then be able to access a more diversified pool of assets via the right of first refusal agreements granted by both OUE Lippo Healthcare Limited and PT Lippo Karawaci Tbk for their portfolios. This will effectively expand First REIT’s geographical catchment within Asia, allowing the Trust to potentially pursue more yield-accretive acquisitions to deliver stable returns to our Unitholders.”
First REIT recently saw its unit price decline by a substantial amount. For those who wish to know more about the development, you can head here.
Last but not the least, we have EC World Real Estate Investment Trust (SGX: BWCU), or EC World REIT. As a quick introduction, EC World REIT is the first Chinese specialized logistics and e-commerce logistics REIT. It owns properties mainly used for e-commerce, supply-chain management and logistics.
For the quarter ended 30 September 2018, EC World REIT reported that gross revenue came in 0.1% higher year-on-year to S$23.9 million while NPI grew by 0.5% year-on-year to S$ 22.2 million. Similarly, the REIT’s DPU was up by 9.0% as compared to last year to 1.57 cents. EC World REIT’s DPU benefited from lower expenses and the absence of a 5% withholding tax that was charged in 2017’s third quarter. If the impact from the withholding tax is removed, EC World REIT’s year-on-year DPU growth in 2018’s third quarter would be 2.3%.
As of 30 September 2018, the REIT’s gearing was 30.7% and its committed occupancy rate stood at 99.2%.
Goh Toh Sim, CEO of EC World REIT’s manager, shared the following comments on the REIT’s outlook:
“We are delighted to deliver another quarter of healthy distributions for our unitholders despite the macroeconomic headwinds and global uncertainty. EC World REIT’s assets are generally unaffected as the tenants within the portfolio serve primarily the domestic China market focused on domestic consumption. As such, we do not expect the ongoing global uncertainty to have a material negative impact on the operation of our assets.”
So there you go, three REITs that are trading at high yields of 8%. Investors should be reminded, however, that high yields alone are not enough to justify a buy decision. Thus, it is important the investors do their research on the trust’s future income prospects before committing any capital.
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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 units of First REIT. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.