An important trait that investors look for is consistency.
In a turbulent world where banks have collapsed and businesses are faced with higher costs due to inflation, stability is a much sought-after attribute.
REITs can provide this stability as they are mandated to pay out 90% of their earnings as distributions.
That said, it is not enough to just select any REIT out of the myriad of choices on the Singapore stock market.
What you need to look for are REITs with a track record of consistent increases in their distribution per unit (DPU).
It also helps if they possess favourable characteristics that can enable them to continue to hold steady amid the challenging environment.
Here are four REITs that have displayed consistent increases in their DPUs in recent years.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is a logistics REIT that owns a portfolio of 186 properties in eight countries worth S$12.6 billion as of 31 December 2022.
The REIT has demonstrated its ability to grow its DPU through the pandemic as logistics properties remain in high demand because of the surge in e-commerce activity.
From fiscal 2019 (FY2019) ending 31 March 2019, DPU has climbed every year without fail from S$0.07941 to S$0.08787 in FY2022.
For the first nine months of FY2023 (9M FY2023), MLT’s DPU has continued its upward momentum, clocking in at S$0.06743, up 3.4% year on year.
There are signs that these increases can continue.
The REIT reported a positive rental reversion of 2.9% for its latest quarter and boasted a high occupancy rate of 96.9%.
It is also undertaking portfolio rejuvenation by divesting older properties with limited redevelopment potential to unlock value.
For 9M FY2023, MLT sold away three such properties in both Singapore and Malaysia.
The logistics REIT is also working on a redevelopment project to increase the gross floor area of a property at 51 Benoi Road in Singapore.
It also purchased two land parcels in Malaysia and plans to merge them to increase the gross floor area fivefold to 700,000 square feet.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres across nine countries with assets under management (AUM) of S$3.7 billion as of 31 December 2022.
The REIT has also displayed an impressive, unbroken rise in DPU from 2019 to 2022, going from S$0.0771 to S$0.10214.
Keppel DC REIT enjoys a high occupancy rate of 98.5% with a long portfolio weighted average lease expiry of 8.4 years, thus providing investors with the certainty of leasing income.
The REIT’s portfolio also contains leases with rental escalations that help it to combat inflation.
During 2022, Keppel DC REIT completed the acquisition of two Guangdong data centres and asset enhancement initiatives (AEI) that helped it to increase its DPU.
It also continues to enjoy the income from its investment in M1’s bonds back in October 2021.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT owns a diversified portfolio of 61 healthcare properties with an AUM of around S$2.2 billion as of 31 December 2022.
The REIT owns three hospitals in Singapore, 57 nursing homes in Japan and strata-titled units/lots in a specialist clinic in Malaysia.
Parkway Life REIT’s DPU has been rising uninterrupted since its IPO in 2007, and from 2019 to 2022, the healthcare REIT saw its DPU increase from S$0.1319 to S$0.1438.
The REIT’s properties have a long WALE of close to 17 years and should see strong demand due to the ageing populations in both Singapore and Japan.
Parkway Life REIT also signed new lease agreements for its three Singapore hospitals that will run until 31 December 2042, thus providing rental income certainty for investors.
Its gearing level stood at just 36.4%, allowing for sufficient debt headroom for further acquisitions.
At an all-in cost of debt of just 1.04%, investors need not worry about the impact of rising interest rates.
CapitaLand Ascendas REIT (SGX: A17U)
CapitaLand Ascendas REIT, or CLAR, is the largest industrial REIT in Singapore with a portfolio of 227 properties worth S$16.4 billion as of 31 December 2022.
CLAR has grown its distribution over the last several years, going from S$0.14688 in 2020 to S$0.15798 just last year.
The number of properties in its portfolio has also risen in tandem, from 200 to 228 over the same period.
CLAR continues to boast a high occupancy rate of 94.6% and reported a positive rental reversion of 8%.
For 2022, the manager completed acquisitions and a redevelopment project worth S$261.6 million while also delivering AEI of S$16.3 million.
CLAR has various ongoing projects including an acquisition under development, redevelopments, and AEIs worth a combined S$617.4 million.
These initiatives should help to continue to grow the REIT’s DPU and increase its asset base to help it to reign as Singapore’s largest industrial REIT.
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Disclosure: Royston Yang owns shares of Keppel DC REIT.
