It is a joy to own a REIT that has raised its distribution per unit (DPU).
REITs are, after all, perfect instruments for income-driven investors as they are mandated to pay out at least 90% of their earnings as distributions to enjoy tax benefits.
However, a combination of high inflation and surging interest rates has dampened sentiment for the asset class.
Because of these headwinds, many REITs are also reporting lower DPU as they are beset by higher operating expenses and finance costs.
Despite these challenges, several REITs have bucked the trend and managed to post higher DPU in their latest earnings.
We highlight four of these that you can consider for your buy watchlist.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres across nine countries valued at S$3.7 billion as of 31 March 2023.
The REIT reported a commendable set of earnings for its fiscal 2023’s first quarter (1Q 2023).
Gross revenue rose 6.5% year on year to S$70.4 million while net property income (NPI) increased by 6.3% year on year to S$63.9 million.
Finance income jumped by 43.8% year on year to S$2.9 million, resulting in DPU inching up by 3% year on year to S$0.02541.
Keppel DC REIT’s trailing 12-month DPU stood at S$0.10289, giving its units a trailing 12-month distribution yield of 4.6%.
The data centre REIT boasted a high occupancy rate of 98.5% as of 31 March 2023 with a long weighted average lease expiry (WALE) of 8.2 years.
Its aggregate leverage came in at 36.8% while its interest cover ratio (ICR) stood healthy at 6.8 times.
The REIT’s cost of debt remained low at 2.8% for 1Q 2023 and around 73% of its debt is locked into fixed rates to mitigate a sharp increase in interest cost.
Keppel DC REIT has a potential data centre pipeline of more than S$2 billion that can be injected in due course.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with 61 properties within its portfolio valued at S$2.2 billion as of 31 March 2023.
For 1Q 2023, gross revenue improved by 21.7% year on year to S$37.3 million while NPI rose 23.5% year on year to S$35.3 million.
DPU for the quarter edged up 2.5% year on year to S$0.0365, bringing its trailing 12-month DPU to S$0.1447.
PLife REIT’s units provide a trailing distribution yield of 3.7%.
The REIT’s WALE stood at an impressive 16.8 years and 98.3% of its leases by gross revenue contained downside protection clauses.
PLife REIT sported a gearing level of 37.5% with a very low cost of debt of just 1.19%, allowing it to borrow more to finance future acquisitions.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, has a portfolio of 185 industrial properties spread across eight countries with assets under management (AUM) of S$12.8 billion as of 31 March 2023.
For its fiscal 2023 (FY2023) ending 31 March 2023, MLT reported a 7.7% rise in gross revenue to S$730.6 million.
NPI increased by 7.2% year on year to S$634.8 million while DPU crept up 2.5% year on year to S$0.9011.
Units of MLT provide a distribution yield of 5.1%.
The logistics REIT also announced a string of positive operating metrics for FY2023.
Portfolio occupancy stood high at 97% with the fourth quarter of the fiscal year seeing a positive rental reversion of 3.1%.
The portfolio also enjoyed a revaluation gain of S$224.2 million.
Aggregate leverage stood at 36.8% with 84% of its loans hedged to fixed rates.
MLT has also hedged 77% of its income stream over the next fiscal year to Singapore dollars to avoid fluctuations in currency rates.
AIMS APAC REIT (SGX: O5RU)
AIMS APAC REIT, or AAREIT, is an industrial REIT with a portfolio of 29 properties of which 26 are in Singapore and the remaining three are in Australia.
FY2023 saw the REIT’s gross revenue rise 17.6% year on year to S$167.4 million with NPI climbing 18.7% year on year to S$122.5 million.
DPU improved by 5.1% year on year to S$0.09944.
Units of AAREIT provide a trailing distribution yield of 7%.
The industrial REIT maintained a high occupancy rate of 98% as of 31 March 2023 with a robust positive rental reversion of 18.5%.
AAREIT’s tenant retention rate also stood high at 78.4%.
The REIT’s gearing level stood at 37.5% with a blended funding cost of 3.4%.
Investors need not fret over sharply higher borrowing costs as the industrial REIT has 88% of its debt on fixed rates.
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Disclosure: Royston Yang owns shares of Keppel DC REIT.