Income investors rejoice when dividends payouts are hiked.
For REITs, their ability to sustain their distribution per unit (DPU) is what makes them attractive investment candidates.
With the requirement for REITs to pay out at least 90% of their taxable income, REIT investors can enjoy a steady stream of passive income.
The stronger cohort of REITs have demonstrated the ability to grow their DPU alongside their assets over time.
By conducting opportunistic acquisitions, these REITs slowly grow their portfolio of real estate assets.
DPU should also grow in tandem, leading to a higher share price as investors are willing to pay more for quality REITs.
By investing in such REITs, you end up enjoying the best of both worlds as you receive higher dividends along with greater capital gains.
Here are three REITs that recently announced acquisitions that will help to boost their DPU.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, invests in a diversified portfolio of income-producing industrial properties and data centres.
The REIT portfolio comprises 87 properties in Singapore along with 28 in the US for total assets under management (AUM) of S$6.8 billion as of 31 March 2021.
Last month, MIT announced a major acquisition of 29 data centres in the US that will increase the data centre weightage within its portfolio to 53.6%.
Its DPU is expected to rise by 3.3% from the S$0.1255 declared for the fiscal year 2021 (FY2021) to S$0.1297.
At the last traded share price of S$2.77, this represents a forward dividend yield of around 4.7%.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns and manages a portfolio of 97 industrial and commercial properties worth around S$6.3 billion as of 31 March 2021.
These properties are spread out across five countries: Australia, Germany, Singapore, the Netherlands and the UK.
The REIT recently announced the acquisition of six freehold industrial properties in Germany, the Netherlands and the UK to add to its portfolio.
Four of these properties will be acquired from its sponsor, Frasers Property Limited (SGX: TQ5), while the remaining two are purchased from an unrelated third party.
These six properties have a high occupancy rate of 97.4% and also have a long weighted average lease to break of 7.6 years based on gross rental income.
The acquisition also marks FLCT’s first foray into the UK Logistics sector.
Post-completion, FLCT’s portfolio will comprise 103 properties worth S$6.8 billion.
Its portfolio metrics will be strengthened too, with the proportion of freehold properties increasing by 2.8 percentage points to 67.9% and the weighted average lease expiry increasing to five years.
Distributable income is expected to rise by 8.4% to S$141.3 million, while DPU will inch up by 1.8% to S$0.3868 for the first half of FY2021.
If the DPU is annualised, unitholders will receive S$0.07736 for FY2021 ended 30 September 2021, and FLCT’s shares will sport a forward dividend yield of 5.4% based on the share price of S$1.42.
Mapletree North Asia Commercial Trust (SGX: RWOU)
Mapletree North Asia Commercial Trust, or MNACT, is a REIT that invests in a portfolio of 12 commercial properties.
These properties are located in China, Hong Kong, Japan and South Korea and the REIT has an AUM of around S$7.9 billion as of 31 March 2021.
Last week, MNACT announced the acquisition of a freehold office building located in Tokyo, Japan for around S$474.4 million.
The building is leased to Hewlett-Packard (NYSE: HPQ) for its Japan headquarters, and the property enjoys full occupancy with a balance lease term of 8.8 years.
Post-acquisition, MNACT’s portfolio will consist of 13 properties valued at S$8.4 billion.
This additional property will also diversify the REIT’s income stream.
In particular, net property income contribution from MNACT’s largest asset, Festival Walk, will fall from 47% to 44%.
Maximum exposure to any single tenant by gross rental income will also be reduced from the current 8.2% to 7.8%.
MNACT’s DPU for FY2021 is expected to rise by 2.4% post-transaction to S$0.06324.
At the share price of S$1.05, the DPU translates to a forward dividend yield of around 6%.
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Disclaimer: Royston Yang owns shares of Frasers Logistics & Commercial Trust.