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2 Stable REITs to Consider During a Bear Market

As investors, we should try to benefit from the opportunities that the market offers us. One of which, in my opinion, is to buy stocks cheaply during a market correction.

Just as there are cycles in almost everything in life (think the weather etc.), there are also cycles in the market – where within the cycle a market correction/downturn is part of it. Thus, our job is to capitalise on such times to buy great stocks at bargain prices.

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In this article, I’ll look at two solid real estate investment trusts (REITs) that investors can consider buying during such a time.

Parkway Life REIT

Parkway Life REIT (SGX: C2PU) is one of the largest REITs in Asia by asset size. The REIT has ownership over three private hospital properties locally and holds stakes in 46 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.

There are two main reasons to have Parkway Life REIT on your watchlist. Firstly, the REIT has stable (and growing) earning power. Here, the REIT derives its stable earnings power from owning hospital properties leased under favorable terms (long leases and built-in rental escalations).

Furthermore, the REIT has demonstrated stable financial performance in the past decade. Since its IPO in 2007 to 2018, Parkway Life has grown its portfolio value by 140.2%. Similarly, gross revenue and distributable income grew by 109% and 189%, respectively, over that period. Such strong growth in underlying performance has allowed Parkway Life to grow its DPU consistently over the years.

Frasers Centrepoint Trust

Next up is Frasers Centrepoint Trust  (SGX: J69U), or FCT. It’s a REIT with a property portfolio comprising of the following suburban retail properties in Singapore: Causeway Point, Northpoint City North Wing (including Yishun 10 Retail Podium), Anchorpoint, YewTee Point, Bedok Point, and Changi City Point. It also holds a 31.15% stake in Hektar Real Estate Investment Trust, a retail-focused REIT in Malaysia.

FCT generally appeals to conservative income investors who seek stability and income over growth. But what if I told you that by investing in FCT over the last decade, investors actually had both dividends and growth? Here’s the track record.

From FY2009 to FY2018, Frasers Centrepoint Trust has grown its DPU from 7.51 cents to 12.015 cents. In other words, DPU was up by 60.0% during that period, giving investors a compounded annual growth rate (CAGR) of 5.4%. Also, FCT’s share price was up from about S$0.70 in early January 2009 to about S$2.20 by the end of 2018. Clearly, it’s a strong candidate to keep on your radar!

Conclusion

Market corrections are an inevitable part of the market cycle. Thus, income investors should have a list of rock-solid REITs to buy during such times. Personally, Parkway Life and Frasers Centrepoint Trust are two REITs that investors can look into when building their buy list.

Want to keep reading on how to lock in those sweet REIT dividends? Our Complete Guide To Buying The Best Singapore REITs dives into what we think you need to know about finding the best REITs that regularly hand you a fat dividend cheque. Click here to download your FREE guide.

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 the shares of Frasers Centrepoint Trust and Parkway Life REIT.