For investors who are nearing retirement or looking to retire soon, one key characteristic they should look for in REITs is income stability. This means the REIT should have a track record of paying out a dependable and predictable distribution per unit (DPU) so as to provide investors with peace of mind and a good night’s sleep.
The problem is that not every REIT makes a great investment, and investors need to be discerning when it comes to choosing a REIT they can hold on to for the long term. One factor to consider is the presence of a strong sponsor, as this can lower borrowing costs for the REIT and also provide it with a ready pipeline of properties for acquisition. You should also observe the track record of asset under management (AUM) growth and the stability of DPU over the years.
Here are three REITs that have solid track records and should be able to provide investors with worry-free dividend income.
No. 1: Mapletree Commercial Trust
Mapletree Commercial Trust (SGX: N21U) is a Singapore-focused REIT that invests in a portfolio of properties used for retail or office purposes. Its portfolio consists of five assets with a total net lettable area (NLA) of 3.9 million square feet worth around S$7 billion as of 30 June 2019.
MCT has a strong sponsor in Mapletree Investments Pte Ltd, which owns and manages S$55.7 billion worth of office, retail, logistics, industrial and residential properties. The REIT has also demonstrated strong DPU growth over the years, with its most recent Q1 2020 earnings report showing a 3.6% year-on-year DPU growth to 2.31 Singapore cents.
With the government’s recent announcement of the planned rejuvenation of the Greater Southern Waterfront as well as the Sentosa-Pulau Brani revamp, MCT’s VivoCity mall stands to be one of the key beneficiaries, thus providing the REIT with good visibility to further grow its DPU.
No. 2: Frasers Logistics & Industrial Trust
Frasers Logistics & Industrial Trust (SGX: BUOU), or FLT, is a REIT that invests in industrial properties in major logistics and industrial markets in Australia, Germany, and the Netherlands. Its portfolio comprises 81 properties worth 2.9 billion Australian dollars, with another 12 properties in the process of being acquired in an announcement posted on July 2019.
FLT has a strong sponsor in Frasers Property Limited (SGX: TQ5), which has assets including residential, retail, commercial, business parks, and industrial properties worth a total of S$33.2 billion as of 31 March 2019. Though DPU in AUD was up 5.6% year on year for the 9-month FY 2019 (the REIT has a 30 September year-end), DPU in SGD was down 2.6% year on year due to the weakening of the Australian dollar against the Singapore dollar.
However, FLT has shown a strong track record of growth since its IPO three years ago, with AUM more than doubling from AU$1.6 billion to AU$3.5 billion. With more potential acquisitions in the pipeline, investors can expect DPU to continue to grow further.
No. 3: CapitaLand Mall Trust
CapitaLand Mall Trust (SGX: C38U) owns and invests in income-producing real estate that is primarily used for retail purposes in Singapore. The REIT’s portfolio consists of 15 shopping malls that are strategically located in the suburban and core downtown areas of Singapore. In addition, CMT also owns a 12.3% interest in CapitaLand Retail China Trust (SGX: AU8U) as of 30 June 2019.
CMT has a strong sponsor in CapitaLand Limited (SGX: C31), which is one of Asia’s largest diversified real estate groups. The REIT has also grown DPU steadily over the years, from 8.85 Singapore cents in FY 2009 to 11.5 Singapore cents in FY 2018. In its most recent H1 2019 earnings report, net property income rose 10.9% year on year while DPU continued its upward trend, rising 3.8% year on year to 5.8 Singapore cents.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Mapletree Commercial Trust, Capitaland Limited, CapitaLand Mall Trust, and CapitaLand Retail China Trust. Motley Fool Singapore contributor Royston Yang owns shares in Frasers Logistics & Industrial Trust.
Motley Fool Singapore 2019