3 REITs with Distribution Yields of More Than 8%
Investors who are looking for regular cash flow from their investment need not look further than REITs. Not only do they have a higher yield than bonds and treasuries, REITs can also appreciate in value, providing capital gains on their investment.
With that in mind, here are three REITs that are currently offering the highest distribution yields in Singapore.
Lippo Malls Indonesia Retail Trust (SGX: D5IU) is first on the list. As its name suggests, the trust invests primarily in retail-related real estate located in Indonesia. It has a portfolio of 23 shopping malls and seven retail spaces located in other malls that are strategically located in major cities with a significant middle-income population.
Currently, the trust has a gearing ratio of 35%, which is a safe distance from the 45% regulatory limit. Its properties also have a stellar track record of appreciating in value, with each of them climbing in value since it was purchased.
At the time of writing, the trust had a trailing distribution yield of 10.2% and a price-to-book ratio of 0.8.
Viva Industrial Trust (SGX: T8B) is the second highest yielding trust in Singapore. It invests primarily in business parks and industrial property trust locally. The trust has an existing portfolio of nine properties with a total value of S$1.28 billion.
In 2017, Viva Industrial Trust, which is slated to merge with ESR REIT, managed to increase its distributions per stapled security by 7.4% to 7.47 cents.
At its last done price, Viva Industrial Trust has a price-to-book ratio of 1.13 and a trailing distribution yield of 8.67%.
Cache Logistics Trust (SGX: K2LU) rounds up this list in third place. Listed in 2010, the trust invests in real estate used for logistics purposes. It has a property line-up that consists of 28 properties located in Singapore, Australia and China.
The trust has a high occupancy rate of 97.3% and a weighted average lease to expiry of 3.5 years. It also has built-in rental escalations in its master leases, which will give it visible organic rental income growth in the future.
At the time of writing, units of the trust exchanged hands at S$0.76 per unit. This translates to a price-to-book ratio of 0.96 and a distribution yield of 8.37%.
A Foolish conclusion
Distributions are, without a doubt, one of the main reasons to invest in REITs. A REIT that has a high distribution yield will, inevitably, seem like a very attractive proposition.
That said, distribution yields are just one aspect of the REIT that we should look at. Besides the distribution yield, investors need to assess if the REIT has a resilient portfolio and a stable balance sheet to maintain or even increase its distributions in the future. Only by looking at all the aspects of a REIT can we make a sound investment decision.