When choosing a suitable REIT to invest in, a few important factors need to be taken into account.
The first is that the REIT should embody characteristics that enable it to remain resilient during times of financial stress.
This trait could take the form of a diversified tenant base, such that rental income is spread out over a wider group of tenants, or a strong sponsor that can help to provide financial muscle.
Having a portfolio that includes resilient or growing sub-sectors also helps to buffer the REIT against severe headwinds.
Of course, having a decent dividend yield is yet another key consideration for income-seeking investors.
When scouting for REITs, a good threshold to look at is a yield above 3%, as this allows you to beat the inflation rate.
Here are three REITs with resilient characteristics that are also providing a dividend yield above 3%.
Mapletree Industrial Trust, or MIT, invests in a portfolio of industrial properties in both Singapore and the US.
As of 30 September 2020, MIT has total assets under management of S$6.6 billion.
Its portfolio consists of 84 properties in Singapore and 27 properties in the US and includes data centres, business parks and light industrial buildings.
For the first half of the REIT’s fiscal year 2021, gross revenue inched up by 0.5% year on year to S$202.5 million.
Net property income increased slightly by 1.5% year on year to S$160.3 million.
These improvements were driven by the REIT’s acquisition of the remaining 60% interest in 14 data centres announced in June. This acquisition was completed on 1 September and the REIT now owns 100% of these properties.
Distribution per unit (DPU) was S$0.0597 for the half-year and would have been higher at S$0.0629 had it not been for tax-exempt income withheld for tenant reliefs in the first quarter.
The annualised DPU stands at S$0.1194, giving the REIT a forward dividend yield of around 3.7%.
Moving forward, the REIT had also announced the acquisition of a data centre and office located in Virginia, USA, slated for completion in the first quarter of 2021.
Data centres remain highly in demand and convey resilience to the REIT’s portfolio. MIT also has a strong sponsor in Mapletree Investments Pte Ltd that it can rely on for financial help should the need arise.
Manulife US REIT is an office REIT that invests in a portfolio of commercial properties located in the US.
The REIT’s portfolio consists of nine freehold and trophy or class A office properties valued at US$2 billion as of 30 June 2020.
For the first half of 2020, the REIT reported an 18.3% year on year jump in gross revenue, while net property income surged by 18.8% year on year to US$62.2 million.
DPU inched up 0.3% year on year to US$0.0305.
Annualised DPU stands at US$0.071, and the REIT’s shares offer a forward dividend yield of 9.7%.
In a business update provided for the REIT’s third quarter of 2020, the nine properties continue to display a high occupancy rate of 94.3% with a weighted average lease expiry of 5.5 years.
The portfolio also demonstrated resilience with rental collection from 94% of tenants during the quarter, with slow collections coming mainly from food and beverage, lifestyle and retail components.
Meanwhile, the manager signed new leases for 217,300 square feet, booking a positive rental reversion of 7.9% for the first nine months of 2020.
Frasers Logistics and Commercial Trust, or FLCT, has a portfolio consisting of 100 industrial and commercial properties spread across Australia, Singapore, the Netherlands, the UK and Germany.
The REIT had just reported its full fiscal year 2020 earnings for the period ended 30 September 2020 (FY2020).
Revenue jumped 53% year on year and adjusted net property income climbed 46.2% year on year to S$258.3 million.
The surge in revenue was due to FLCT’s recent merger with Frasers Commercial Trust, as well as acquisitions made by the REIT during the fiscal year.
DPU for FY2020 increased by 1.7% year on year to S$0.0712. At the moment, FLCT’s shares offer a trailing dividend yield of 5.3%.
FLCT’s portfolio remains resilient with a high occupancy rate of 97.5% as of 30 September 2020.
Besides, the REIT also has a well-diversified tenant base with no single tenant making up more than 4.7% of gross rental income.
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Disclaimer: Royston Yang owns shares in Frasers Logistics and Commercial Trust.