REITs remain an attractive asset class for income-seeking investors amid Phase 3.
Many are still paying out healthy dividends to unitholders.
But as an income-focused investor, you’re probably looking at the sustainability of these dividends.
After all, weaker REITs that face insurmountable problems in the future may either reduce or even eliminate their payouts.
Whether a REIT can pay you dividends through thick and thin depends on a few factors — the type of sector it’s in, whether it has a strong sponsor, and the assets it holds.
If all three attributes above check out, there’s a high chance the REIT can continue paying out distributions for the rest of your life.
Here are four REITs that should qualify as being worthy of your consideration.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that invests in a portfolio of income-producing hospitals and nursing homes in Singapore, Malaysia and Japan.
Its portfolio consists of 53 properties worth around S$2 billion as of 31 March 2021.
Due to its nature, the REIT’s properties remain resilient during crises and sees steady demand for its range of healthcare and medical services.
For its fiscal 2021 first quarter (1Q2021), Parkway Life REIT reported a resilient set of results.
Gross revenue inched up 0.4% year on year to S$30 million while net property income (NPI) crept up 1% year on year to S$28 million.
Distributable income rose 7.4% year on year, with distribution per unit (DPU) rising by a similar quantum to S$0.0357 for the quarter.
Parkway Life REIT has an unblemished track record of increased DPU every single year since it listed back in 2006, if we exclude the one-off capital distributions.
Gearing remains fair at 37.8%, allowing room for the REIT to borrow more for acquisitions. The cost of debt is also very low at just 0.55%.
There’s a high chance that Parkway Life REIT can continue paying steadily increasing DPU in the future as around 95% of the REIT’s leases have downside protection clauses along with rent escalation features.
The one caveat is the lease for its Singapore hospitals is up for renewal in August 2022.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT that owns 19 data centres across eight countries.
Total assets under management (AUM) stands at around S$3 billion as of 31 March 2021.
The COVID-19 pandemic has accelerated the digital transformation of many businesses around the world, leading to a spike in the usage of public cloud services.
Because of this trend, hyperscale and colocation data centre operators are ramping up capital spending.
Data centre spending in the Asia-Pacific region is expected to surpass US$35 billion by 2024, making up more than 35% of the global market.
The surge in global internet traffic, which was up 47% year on year in 2020, and subsequent higher demand for data centres bode well for Keppel DC REIT.
Gross revenue for 1Q2021 increased by 10.6% year on year to S$66.7 million.
NPI rose by 10% year on year to S$61 million, while DPU jumped by 18.1% year on year to S$0.02462.
Investors can look forward to steadily growing DPU as the REIT latches on to these long-term tailwinds.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns and operates a portfolio of 10 retail malls and one office property, all located in Singapore’s suburban areas.
The retail portfolio comprises around 2.3 million square feet of lettable area and has an AUM of around S$6.4 billion as of 31 March 2021.
FCT’s portfolio benefitted from its acquisition of the remaining 63.1% stake in the AsiaRetail Fund Limited portfolio of five properties.
Suburban malls are also seeing healthier footfall and tenant sales compared to malls located in prime areas as they are frequented by heartlanders.
For February 2021, FCT’s portfolio tenant sales saw an 11.7% year on year increase.
For its fiscal 2021 half-year earnings report (1H2021), FCT’s financial performance also witnessed a strong rebound after the circuit breaker last year.
Gross revenue surged by 73.8% year on year to S$173.6 million while NPI also increased by the same quantum.
DPU jumped by 28.4% year on year to S$0.05996 and net asset value increased by 4.5%.
Moving forward, the REIT should continue to enjoy healthy footfall as the recovery takes hold.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, invests in a portfolio of industrial properties and data centres located in Singapore and the US.
As of 31 March 2021, MIT’s AUM stood at S$6.8 billion and its portfolio consisted of 87 industrial properties in Singapore and 28 properties in the US.
The REIT recently increased the data centre weightage in its portfolio to 53.6% with a major acquisition of 29 data centres in the US.
With a higher level of contribution from data centres, MIT’s portfolio will grow more resilient over time.
For its fiscal 2021 earnings ended 31 March 2021, the REIT reported a 10.2% year on year increase in gross revenue to S$447.2 million.
DPU inched up 2.5% year on year to S$0.1255.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT.