Real estate investment trusts (REITs) have always been one of the favourite investment choices for risk-averse investors due to the stable earnings profile. Additionally, the better ones can consistently grow earnings as well as distribution per unit (DPU) over time. This combination is what any income investor should want.
Though REITs are generally more stable investment vehicles as compared to companies, it is not easy to find REITs that can grow its DPU every year, for say, over a decade. But there is a REIT in Singapore that has done just that.
The REIT I’m talking about is Parkway Life REIT (SGX: C2PU). As a quick introduction, Parkway Life REIT is one of the largest listed healthcare REITs in Asia by asset size. The REIT has ownership over three private hospital properties locally and hold stakes in 46 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.
Now let’s look at Parkway Life REIT’s DPU performance since its IPO:
Source: Parkway Life REIT’s Results Presentation
From the above, we can see that Parkway Life has grown its DPU from 6.32 cents in 2007 to 12.87 cents in 2018. In other words, its DPU more than doubled in the last decade. Moreover, the DPU has grown every year during that period (excluding the special distributions in 2015 and 2017).
Such performance can only come from sustainable growth in Parkway Life’s underlying profitability. Let’s look at its growth track record.
Since its IPO in 2007 to 2018, Parkway Life has grown its portfolio value by 140.2%. Similarly, gross revenue and distribution income grew by 109% and 189%, respectively, over that period. Such strong growth in underlying performance has been one of the main reasons that Parkway Life was able to consistently grow its DPU over the years.
Parkway Life has demonstrated solid growth in the last decade or so. What’s more, with the long-term outlook of the healthcare industry continuing to be positive (driven by an ageing population regionally, demand for better quality healthcare as well as aged care services), it is not unreasonable to expect the REIT to continue its strong performance in the foreseeable future.
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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool Singapore has recommended shares of Parkway Life REIT.