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This Solid Singapore REIT Grew its DPU by 154% Over the Last Decade

Real estate investment trust (REIT) has always been one of the favourite investment choices for risk-averse investors due to its stable earnings qualities. Moreover, the better ones can consistently grow its earnings, as well as distribution per unit (DPU) over time.

Though REITs are generally more stable investment vehicles as compared to companies, they don’t usually grow at high rates. Occasionally, however, we might find one that can grow at respectable rates. And this brings us to the main part of this article – sharing this solid REIT that has grown its DPU by more than 150% in the last decade.

The outlier

The REIT that we will look at here is First Real Estate Investment Trust (SGX: AW9U). As a quick introduction, First REIT is a healthcare-focused real estate investment trust. It currently has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsors are PT Lippo Karawaci Tbk and OUE Lippo Healthcare Limited.

Now let’s look at First REIT’s DPU performance since its IPO:

Source: First REIT’s results presentation

Consistent growth in DPU

From the above, we can see that First REIT has grown its DPU from 7.62 cents in 2008 to 8.60 cents in 2018.

At first glance, the growth might seem insignificant over the decade. Yet, investors should note that there was a significant rights issue in the year 2010 that grew the share count by 125%. Thus, adjusted for the right issues in 2010 of 5 shares for every existing 4 shares, DPU grew from 3.39 cents to 8.60 cents during that period. Here, we assume that investors subscribed to the rights issue in 2010.

In other words, the DPU was up by 153.7% during that period, giving investors a compound annual growth rate (CAGR) of 9.8%. Such an outstanding performance in DPU growth can only come from sustainable growth in First REIT’s underlying profitability. Let’s look at its business track record below:

Source: First REIT’s results presentation

From 2007 to 2018, First REIT delivered a CAGR of 13.8% in its portfolio value. Similarly, a CAGR of 12.1% in distribution income was achieved during that period. Such strong growth in underlying performance was the main reason that First REIT could consistently grow its DPU over the years.

Key takeaway

First REIT has demonstrated solid growth in the last decade. Moreover, with the long-term outlook of the healthcare industry in Asia continuing to be positive, 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. The Motley Fool Singapore has recommended shares of First Real Estate Investment Trust.