Real estate investment trusts (REITs) are popular among Singaporeans. REITs are obliged to distribute at least 90% of their taxable income to enjoy tax benefits. Therefore, by investing in REITs, investors can receive regular distributions, usually on a quarterly basis.
According to a recent report by the Singapore Exchange, the 34 REITs and six stapled trusts in Singapore averaged a 6.6% distribution yield. For context, the FTSE ST REIT Index (SGX: FSTAS8670) has a 6.0% yield.
With that, here are the top three highest-yielding REITs in the Singapore stock market (yield data as of 18 May 2018):
1. Coming in first is Lippo Malls Indonesia Retail Trust (SGX: D5IU), with a distribution yield of 10.4%. The REIT owns 23 retail malls and seven retail spaces located within other retail malls in Indonesia. For the first quarter ended 31 March 2018, the REIT’s gross revenue went up 1.1% year-on-year to S$49.1 million, but its distribution per unit (DPU) slumped 24.7% to 0.67 Singapore cent. As of the end of the latest quarter, the REIT had a gearing ratio of 35%, well below the regulatory ceiling of 45%.
2. With a yield of 8.5%, Soilbuild Business Space REIT (SGX: SV3U) ranks second among the highest-yielding REITs in Singapore. The REIT owns a total of 11 business park and industrial properties in Singapore, which includes Solaris, West Park BizCentral, and Eightrium @ Changi Business Park. For the first quarter of 2018, gross revenue tumbled 11.5% year-on-year to S$19.4 million while DPU fell 11.1% to 1.324 cents. As of 31 March 2018, Soilbuild Business Space REIT had a gearing ratio of 40.2%.
3. Stealing the third spot is Viva Industrial Trust (SGX: T8B), which has a yield of 8.4%. The stapled trust, which is slated to be merged with ESR-REIT (SGX: J91U), owns nine properties located in Singapore. For the first quarter ended 31 March 2018, gross revenue improved by 4.8% to S$28.7 million, but distribution per stapled security (DPS) inched down by 0.9% to 1.838 Singapore cents. The fall in DPS was largely due to the management fees payable to Viva Industrial Trust’s manager and property manager for the reporting quarter being entirely paid in cash (instead of a combination of cash and stapled securities). At the end of March, the stapled trust had a gearing ratio of 40.6%, which is the highest among the 40 REITs and stapled trusts.
The Foolish takeaway
REITs with high distribution yields may not necessarily make good investments. As Foolish investors, we have to look for REITs that can grow, or at least sustain, their distributions year-after-year.
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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 shares of Singapore Exchange. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange.