The Smart Investor
    Facebook Instagram
    Friday, September 29
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»REITs»3 Reasons REITs Still Deserve a Place in Your Portfolio
    REITs

    3 Reasons REITs Still Deserve a Place in Your Portfolio

    Royston YangBy Royston YangMarch 17, 2021Updated:June 17, 20214 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    Investors are witnessing a nascent recovery as several COVID-19 vaccines are being distributed around the world.

    There is optimism that leisure travel should soon resume by the second half of this year, as airlines and cruise companies prepare a set of protocols and processes to ensure passengers are safe.

    Once the World Health Organisation declares that the world is safe from the coronavirus, governments will be able to reopen their borders and travel can resume once again.

    As we look to the future, REITs should continue to feature prominently in investors’ portfolios due to their unique characteristics and strengths.

    Here are three reasons why REITs still deserve a place within your investment portfolio.

    Safety and resilience

    REITs are composed of a portfolio of real estate assets that are bundled into a security that can be bought or sold on the stock exchange.

    As such, physical real estate are hard assets that should hold their value even during a crisis, especially if the properties are well-located and enjoy high demand from tenants.

    This attribute offers safety and resilience for unitholders as it is unlikely that the value of a REIT will go to zero.

    As an example, Ascott Residence Trust (SGX: HMN), or ART, a hospitality REIT, reported a 28% year on year fall in revenue for 2020 as COVID-19 badly impacted its operations.

    Distribution per stapled security plunged by 60% year on year to S$0.0303.

    Despite this, unitholders will do well to remember that ART owns S$7.2 billion worth of assets across 86 properties within 15 countries.

    These quality assets should stand the REIT in good stead when the recovery kicks in and should offer unitholders peace of mind that the REIT will continue to do well.

    Still paying dividends

    Compared to normal businesses that may need to eliminate dividends to survive through this crisis, the vast majority of REITs have still managed to pay out some level of dividends.

    When you invest in non-REIT companies, there is a chance of dividends being eliminated or permanently cut as most will not have a portfolio of income-generating properties that pay a consistent rental income.

    REITs, on the other hand, are obligated to pay out at least 90% of their earnings as dividends.

    Take Frasers Centrepoint Trust (SGX: J69U), or FCT, for instance.

    The retail REIT reported a 25% year on year decline in its distribution per unit (DPU) for its full fiscal year 2020 ended 30 September 2020.

    The decline was due to lower footfall as a result of movement restrictions imposed due to the pandemic.

    However, unitholders should take comfort in knowing that the REIT still managed to pay out a DPU of S$0.09042 despite having to limit traffic to its malls in 2020.

    Better days are ahead.

    Also, in FCT’s latest fiscal 2021 first-quarter business update, tenant sales in its portfolio had largely recovered in December 2020, being down just 1.3% year on year.

    Unitholders can therefore look forward to potentially higher year on year DPU when the REIT reports its half-year results in May.

    Continued growth

    REITs still offer tantalizing growth prospects for investors.

    They can achieve this through acquisitions, asset enhancement initiatives (AEI) or higher rental reversion (i.e. increasing annual rental rates to tenants).

    ART announced the acquisition of a Signature West Midtown, a freehold property used for student accommodation, in the US for US$95 million back in January this year.

    The maiden acquisition in the US will expand the REIT’s mandate to include student accommodation assets and will add around 4.4% to ART’s fiscal year 2020 distribution.

    ART’s move is a great example of a REIT that still strives to grow despite facing strong headwinds due to the pandemic.

    ESR-REIT (SGX: J91U), an industrial REIT with 57 properties located across Singapore, reported a 30.2% year on year fall in DPU as the manager retained income for tenant relief measures.

    However, the REIT is pressing on with the AEI of its 19 Tai Seng Avenue and UE BizHub East.

    Both AEI are slated to be completed this year and will rejuvenate the buildings to enable them to attract and retain quality tenants.

    Want to know what are the 10 Growth Stocks that could Supercharge Your Portfolio? In our latest special FREE report, we cover 3 unstoppable growth trends and the 10 stocks that will ride them in 2021 and beyond! CLICK HERE to download now!

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Parkway Cancer Centre

    Interest Rates Stay Higher for Longer: 4 Stocks That Can Give You Peace of Mind

    September 29, 2023
    old chang kee

    5 Delicious Food-Related Singapore Stocks You Can Add to Your Buy Watchlist

    September 28, 2023
    Dexcom G6 | Image credit: dexcom.com

    4 US Stocks Reporting Impressive Growth That Can Power Your Portfolio Higher

    September 28, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.