REITs are popular with investors looking for income because of their steady, dependable dividends.
However, not all REITs are built the same.
If you are a retiree, it’s paramount that the chosen REIT has certain attributes that enable it to continue to pay out a steady stream of dividends and allow you to sleep well at night.
Among the key characteristics are a strong track record of consistent distribution per unit (DPU), both in good times and bad, a diversified property portfolio, and tailwinds for further growth.
Not many REITs have these characteristics, but we managed to uncover three that we think retirees should include in their watchlists.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that owns a diversified portfolio of 53 healthcare-related properties.
The REIT’s portfolio consists of three hospitals in Singapore and 49 private nursing homes in Japan, along with strata-titled units in MOB Specialist Clinic in Kuala Lumpur, Malaysia.
When it comes to DPU consistency, Parkway Life REIT clinches the gold medal hands down.
The REIT has reported an unbroken track record of rising DPU for 13 consecutive years.
DPU stood at S$0.0632 back in the fiscal year 2007 and has more than doubled to S$0.1379 in 2020.
And Parkway Life REIT looks poised to continue this track record.
For its fiscal 2021 first quarter (1Q2021), the REIT reported that gross revenue inched up 0.4% year on year to S$30 million despite the pandemic.
Net property income (NPI) was up 1% year on year to S$28 million while DPU climbed by 7.4% year on year to S$0.0357.
Annualised DPU stood at S$0.1428, with units of the REIT providing a yield of around 3.4%.
The REIT’s gearing stood at 37.8% as of 31 March 2021, providing the REIT with ample debt headroom of S$269.7 million before hitting the 45% leverage threshold.
Meanwhile, Parkway Life REIT’s all-in cost of debt is also very low at just 0.55% per annum.
This low-interest rate is a low hurdle that ensures the REIT can easily make future yield-accretive acquisitions.
Ascendas REIT (SGX: A17U)
Ascendas REIT, listed back in November 2002, is Singapore’s oldest industrial REIT.
Its portfolio comprises 209 properties worth S$15.1 billion as of 31 March 2021.
The REIT’s properties are well-diversified not just by asset class but also geographically.
Of the 209 properties, 46% are business parks while 23% belong to the logistics asset class. Around 10% of the portfolio consists of data centres that are seeing growing demand during this crisis.
Around 60% of the REIT’s portfolio comprises Singapore properties while the rest are spread out in Australia, the US and the UK/Europe.
This diversity means that Ascendas REIT is not overly reliant on any one industry or tenant for its rental income, offering resilience during challenging economic times.
The occupancy rate remained high at 90.6% as of 31 March 2021 and the REIT reported a positive rental reversion of 3% for the quarter.
These attributes stand the REIT in good stead to weather the tough times and continue delivering steady DPU growth.
Ascendas REIT also has a strong track record of acquisitions that have helped to grow its portfolio over the years.
The REIT had just completed S$1.2 billion worth of acquisitions for its latest quarter and is undertaking around S$251.2 million more.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a REIT that owns a portfolio of 19 data centres located across eight countries.
The portfolio was worth S$3 billion as of 31 March 2021.
Data centres are seeing strong and resilient demand due to a surge in data usage caused by the pandemic.
Industry fundamentals are encouraging, with enterprise spending on cloud infrastructure increasing by more than 30% in 2020 and expected to rise at an annual rate of 20% through 2025.
Global internet traffic saw a 47% year on year surge in 2020, resulting in higher demand for data centres.
Keppel DC REIT is well-positioned to ride on this long-term trend.
The REIT’s 1Q2021 earnings demonstrated continued growth, with gross revenue up 10.6% year on year.
DPU jumped by 18.1% year on year to S$0.02462.
The REIT also has a strong sponsor in Keppel Corporation Limited (SGX: BN4), a blue-chip conglomerate.
In March, the REIT expanded its investment mandate to include real estate and assets in the digital connectivity sector.
In line with the expanded mandate, Keppel DC REIT announced that it will invest S$87 million for debt securities and preference shares concerning an investment in M1’s network assets.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT.
