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3 Ultra-High-Yield REITs Right Now

Since debuting in Singapore in 2002, real estate investment trusts (REITs) have grown to become one of the more popular investment vehicles. Besides providing investors with exposure to a wide variety of properties, REITs are also highly liquid, provide high dividend yields and can also appreciate in value. In the last few months, REITs have risen in value due to the US Federal Reserve’s more dovish stance on interest rates.

Despite the higher valuations now, there are still many REITs in the market that currently sport relatively high yields. With that said, here are the three highest-yielding REITs in the market right now.

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REIT #1

Topping the list is Lippo Malls Indonesia Retail Trust (SGX: D5IU) with a dividend yield of 9.0%. The trust’s unit price has been hammered down in recent years, though, due to its declining distribution per unit (DPU). In the most recent quarter, the trust again suffered a 17.9% decline in DPU due to lower rental income at two properties after expiration of master leases, higher property expenses and the weakening of the Indonesian Rupiah against the Singapore dollar.

In 2018, the trust’s DPU fell 40.5% to 2.05 Singapore cents, largely due to a newly-introduced property tax regulation in Indonesia which took effect in January 2018.

REIT #2

With a distribution yield of 8.2%, Dasin Retail Trust (SGX: CEDU) comes in second.

The trust, which owns a portfolio of four shopping malls in China had a respectable 2018 as net property income and DPU increased by 23.1% and 0.8%, respectively. However, one thing to note about Dasin Retail Trust is its unique income support. Currently, two of its largest shareholders – Aqua Wealth Holdings and Bounty Way Investments – have waived off their share of distributions. As such, distribution per unit is artificially higher.

The income support will fall away in 2022. Excluding the distribution waiver, the trust’s DPU in 2018 was 3.81 Singapore cents. This translates to an adjusted distribution yield of 4.3%.

REIT #3

Completing this list with a distribution yield of 8.1% is First Real Estate Investment Trust (SGX: AW9U).

This healthcare trust, which owns properties in Indonesia, Korea, and Singapore, has been harshly beaten down by market participants over the past few quarters. Part of the reason for the sell-off was due to the downgrade of the credit rating of First REIT’s sponsor and major tenant, Lippo Karawaci Tpk.

Investors are concerned about whether Lippo Karawaci will renew its existing master lease contracts with First REIT. In 2018, 82.21% of First REIT’s rental income was from PT Lippo Karawaci Tbk and its subsidiaries.

The Foolish bottom line

REITs are well-loved investment vehicles among income-hungry investors. However, the current yield is just one aspect of a REIT. Investors should also consider the stability of the yield, risk of loss of rental income, and the trust’s gearing (debt) among other aspects in order to make an informed 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 First Real Estate Investment Trust. The Motley Fool Singapore has a recommendation on First Real Estate Investment Trust.