REITs continue to be a great source of dividends despite facing headwinds from high inflation and surging interest rates.
With interest rates poised to come down, the sector should see some pressure easing on distributions.
Income investors should look for REITs with quality portfolios that are backed by a strong sponsor.
These attributes, coupled with a high yield, make such REITs suitable to own for the long term.
Here are four Singapore REITs with such characteristics that sport distribution yields of 4.7% or higher.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 21 properties in Singapore, two in Germany, and three in Australia.
The REIT’s total assets under management stood at S$24.5 billion as of 31 December 2023.
For 2023, CICT saw its gross revenue rise 8.2% year on year to S$1.6 billion while net property income (NPI) increased by 7% year on year to S$1.1 billion.
Distribution per unit (DPU) inched up 1.6% year on year to S$0.1075.
At a unit price of S$2.06, CICT’s units offer a trailing distribution yield of 5.2%.
CICT also has a strong sponsor in blue-chip real estate investment manager CapitaLand Investment Limited (SGX: 9CI).
For the first quarter of 2024 (1Q 2024), CICT’s financial and operating metrics remained robust.
NPI increased by 6.3% year on year to S$293.7 million with portfolio committed occupancy staying high at 97%.
Rental reversion for 1Q 2024 was positive for both the retail and commercial divisions at 7.2% and 14.1%, respectively.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with 23 data centres across nine countries with an AUM of S$3.7 billion.
The 1Q 2024 saw a mixed performance from the REIT.
Gross revenue improved by 18.4% year on year to S$83.4 million while NPI increased by 11.2% year on year to S$71 million.
DPU for the quarter fell by 13.7% year on year to S$0.02192 because of a provision made for Guangdong data centres under a troubled tenant – Bluesea.
The data centre REIT’s trailing 12-month DPU stood at S$0.09034, giving its units a trailing 12-month distribution yield of 4.7%.
Despite the lower DPU, Keppel DC REIT has a strong sponsor in asset manager Keppel Ltd (SGX: BN4).
Portfolio occupancy stayed high at 98.3% as of 31 March 2024 with a long portfolio weighted average lease expiry (WALE) of 7.4 years.
The data centre REIT just announced its maiden acquisition in Japan which should increase its 2023 DPU by 1.1% to S$0.09488.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, is another data centre REIT with a portfolio of 10 data centres with an AUM of US$1.4 billion.
DCR has a strong sponsor in Digital Realty Trust (NYSE: DLR), a data centre REIT listed in the US with more than 300 data centres across 50 cities in 28 countries around the world.
For 2023, the REIT saw a 4.8% year-on-year dip in revenue to US$102.6 million while NPI fell by 9.1% year on year to US$63.1 million.
DPU for the year declined by 7% year on year to US$0.037.
DCR’s trailing distribution yield stood at 6% at a unit price of US$0.62.
For 1Q 2024, the REIT saw revenue and NPI fall by 8.2% and 9.5% year on year, respectively.
However, distributable income fell by a gentler 2.4% year on year to US$10.6 million.
Despite the fall, the data centre REIT sported strong operating metrics.
Portfolio occupancy stood high at 95% while aggregate leverage was at 35.1%, giving the REIT a debt headroom of US$115 million for acquisitions before hitting the 40% level.
OUE REIT (SGX: TS0U)
OUE REIT is a commercial and hospitality REIT with a portfolio of six assets in Singapore and one in Shanghai.
The total AUM for the REIT stood at S$6.3 billion as of 31 December 2023.
The REIT also has a reputable sponsor in OUE Ltd (SGX: LJ3), a real estate and healthcare group with a portfolio of properties valued at S$9.3 billion as of 31 December 2023.
OUE REIT reported a resilient set of earnings for 2023.
Revenue rose 18% year on year to S$285.1 million with NPI jumping 19.3% year on year to S$235 million.
Finance costs, however, climbed 30% year on year to S$104.1 million, causing DPU to slip by 1.4% year on year to S$0.0209.
The REIT’s units provide a trailing distribution yield of 7%.
1Q 2024 saw an encouraging business update from OUE REIT.
Revenue rose 9.5% year on year to S$74.9 million while NPI improved by 6.9% year on year to S$60.5 million.
Investors will be glad to know that the REIT has no refinancing requirements until the second half of 2025 when a quarter of its debt comes due.
Its Singapore office portfolio also sported a high committed occupancy of 95.1% with a positive rental reversion of 12.6%.
Mandarin Gallery, the retail portion of its hospitality asset, did even better.
Committed occupancy came in at 96.6% with a positive rental reversion of 22% for the quarter.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Digital Core REIT.
