Updated: Oct 17, 2019
When searching for quality and good fundamentals real estate investment trusts (REITs), one of the necessary financial ratios that investors always look out for is dividend yield. As REITs are highly regulated, they are obligated to distribute at least 90% of its distributable incomes to the shareholders. In our previous article, we have highlighted that while dividend yield is crucial, investors should not just chase for high dividend yield, but should also look for sustainability and potential growth of the dividend payout in the long run instead.
Today, we will go through three REITs that are paying more than 8.5% dividend yield based on the current stock prices. All three REITs are managing portfolios with foreign assets.
1. Lippo Malls Indonesia Retail Trust (SGX: D5IU)
Lippo Malls is offering a dividend yield of 11%. The 2nd quarter results have shown improvement, with a 1.9% increase in net property income. This was mainly due to effective cost management and positive rental reversions. However, Lippo Malls has been suffering from declining distribution per units (DPUs) in the past five years (average was -7% per year), primarily due to the depreciation of Rupiah and also the softening of the retail sector.
Besides, the interest cost of 6.4% is relatively high as compared to its peers. Most of its assets are leasehold, with an average lease of 10 to 20 years. Thus, its net asset values per share is most likely declining over the years. With the stated risks above, we prefer to remain the REIT under our watchlist until the scenario turns more favorable.
2. Soilbuild Business Space REIT (SGX: SV3U)
Soilbuild is currently trading at 9.1% dividend yield. However, it has been suffering from declining dividends as well. This was largely due to higher financing cost and also distribution to the perpetual securities holders. The 88% occupancy rate is relatively low as compared to its peers, and almost 20% of its leases are expiring next year. We would potentially see some drop out of tenants, which will impact the rental income eventually.
In August, Soilbuild has announced to acquire a multi-tenanted freehold Grade A office in Adelaide. To finance the acquisition, the REIT has launched an 18-for-100 preferential offering at 5.4% discount to its last close. The offering will dilute its DPUs by 2.4% and net asset values per share by 3.2%.
3. EC World REIT (SGX: BWCU)
EC World REIT offers a 9% dividend yield with almost full occupancy at 99.07%. It has been the beneficiary from China’s economic growth (GDP up 6.23% in 1H2019), which is supported by both fiscal and monetary policy. Recently, EC World REIT announced the acquisition of Fu Zhou E-commerce, which is both yield and asset accretive.
The downside risk is well-protected, with all its SGD offshore loans hedged at a fixed rate.
EC World REIT is one of the key constituents in our REITs Portfolio, which yields a profit of 11% year-till-date.
Are you looking for a REIT portfolio that beat the market performance, get exclusive access to our model portfolio. Get Started Today »