Those who invest in REITs usually go for consistent and stable income. While REITs are normally viewed as yield-related investments, the well-run ones can boast an element of growth as well, achieved through various methods such as asset enhancement initiatives and mergers and acquisitions.
REITs with strong sponsors and a history of growing their distribution per unit (DPU) over time can provide investors with the best of both worlds: capital gains over the long term as well as regular, stable cash inflows. The bonus here is not just a gain in the share price of the REIT as it grows its portfolio, but you’ll also enjoy higher DPU over time due to rental appreciation and a higher appraised value of the underlying properties.
Here are three REITs to consider if you’re looking for a combination of growth and dividends.
1. Mapletree Commercial Trust
Mapletree Commercial Trust (SGX: N21U) is a Singapore-focused REIT that invests in income-producing real estate used primarily for office and/or retail purposes. Its portfolio consists of five properties in Singapore, with the crown jewel being VivoCity mall. The REIT is in the process of getting approval for the proposed acquisition of a sixth asset, Mapletree Business City (MBA) Phase II.
MCT has grown its dividend impressively over the years. For FY 2012 (ended 31 March 2012), DPU was just 5.271 Singapore cents. By FY 2019, this had grown to 9.14 Singapore cents. The compound annual growth rate (CAGR) for dividends over this 8-year period was 8.2%, and the share price over the last eight years has also rallied from S$0.85 to the current S$2.36, a 178% increase.
2. Frasers Centrepoint Trust
Frasers Centrepoint Trust (SGX: J69U) is a retail-focused REIT that owns a portfolio of seven malls located in key heartland areas of Singapore. FCT’s malls boast a large and diversified tenant base covering a wide variety of trade sectors.
From FY 2010 (ended 30 September 2010) till FY 2019, FCT grew its DPU by a CAGR of 4.4% over nine years from 8.2 Singapore cents to 12.07 Singapore cents. This was an impressive rate of increase considering the properties are suburban malls located in heartland districts, and FCT has not had a single year-on-year decline in DPU in the last nine years. FCT’s share price has also rallied 96.4% from S$1.40 to S$2.75 during this period.
3. CapitaLand Commercial Trust
CapitaLand Commercial Trust (SGX: C61U), or CCT, is Singapore’s first and largest commercial REIT, with deposited property valued at S$11.3 billion as of 30 June 2019. The REIT owns a portfolio of eight commercial properties in Singapore and one in Frankfurt, Germany.
From FY 2010 till FY 2018, CCT grew its DPU from 7.83 Singapore cents to 8.7 Singapore cents for a CAGR of 1.3%. There was a slight dip in DPU from FY 2016 to FY 2017, but overall, DPU has been growing steadily. CCT’s share price has also risen from S$1.14 back in 2010 to S$2.06, for an 80.7% gain.
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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, Frasers Centrepoint Trust, and CapitaLand Commercial Trust. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.
Motley Fool Singapore 2019