5 Real Estate Investment Trusts with Distribution Yield above 6% for the Past 3 Years

The Distribution Yield, which being expressed as a percentage, is a financial ratio that shows how much a REITs pays out in distribution each year relative to its stock price.

The formula to derive Distribution Yield is as follows:

(Total Distribution Per Unit/Average Historical Unit Price)

Distribution Yield is an estimate of the yield-only return on the REIT investment. Assuming the total distribution per unit remained the same, the yield will rise when the unit price falls. And conversely, it will fall when the unit price rises.

Given the low interest rates environment, many investors are searching for solutions to achieve a higher return on their investments. One option for them will be to invest in REITs that could potentially provide them with higher distribution yield.

A good distribution yield generally varies depending on market conditions and the REIT’s ability to pay the intended distribution. Overall, a distribution yield above 6% is considered ideal, with the current market conditions.

Hence, here are 5 such REITs:

• Sabana Shari'ah Compliant REIT (SGX: M1GU)

• Cromwell European REIT (SGX: CNNU)

• EC World REIT (SGX: BWCU)

• ESR REIT (SGX: J91U)

• Keppel Pacific Oak US REIT (SGX: CMOU)

1) Sabana Shari'ah Compliant REIT (SGX: M1GU)

Sabana Shari’ah Compliant REIT (“Sabana REIT”) was listed on SGX on 26th November 2010. It was established principally to invest in income producing real estate used for industrial purposes, as well as real estate-related assets, in line with Shari’ah investment principles.

As at 31 December 2020, Sabana REIT has a diversified portfolio of 18 properties in Singapore, in the high-tech industrial, warehouse and logistics, chemical warehouse and logistics, as well as general industrial sectors.

For the past 3 financial years, Sabana REIT’s total distribution per unit was on a declining trend. However, its distribution yield has risen to 7.4% in FY2020, from 6.6% in FY2019 due to the sharper fall in unit price.

That said, investors can look forward to its new opening of NTP+ Mall in 2Q2021. It is a two-storey shopping mall opposite Lorong Chuan MRT Station and is part of the ongoing Asset Enhancement Initiative (AEI) at New Tech Park.

Sabana REIT’s unit price last traded at S$0.425, with a market capitalization of S$447.56 million.

2) Cromwell European REIT (SGX: CNNU)

Cromwell European Real Estate Investment Trust (“Cromwell European REIT”) is a real estate investment trust (“REIT”) with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate assets in Europe that are used primarily for office, light industrial/logistics and retail purposes.

Cromwell European REIT’s portfolio comprises 96 properties which are close to major gateway cities in the Netherlands, Italy, France, Poland, Germany, Finland and Denmark.

For the past 3 financial years, Cromwell European REIT has been able to garner above 7% distribution yield. For FY2020, its distribution yield stood at 7.6%, a slight decline from FY2019’s figure of 8.1% as a result of an enlarged number of total units issued.

Cromwell European REIT’s unit price is last traded at €0.47, with a market capitalization of €1.31 billion.

3) EC World REIT (SGX: BWCU)

EC World REIT is the first Chinese specialised logistics and ecommerce logistics REIT listed on SGX. EC World REIT’s investment strategy is to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate which is used primarily for e-commerce, supply-chain management and logistics purposes, as well as real estate-related assets.

With a portfolio of eight quality properties located predominantly in one of the largest e-commerce clusters in the Yangtze River Delta, EC World REIT offers investors unique exposure to the logistics and e-commerce sectors in Hangzhou and Wuhan, the People’s Republic of China (“PRC”).

EC World REIT’s distribution yield was hovering around the 8% mark for the past 3 financial years. However, investors should also take note that the total distribution per unit and distribution yield was on a declining trend.

EC World REIT’s unit price is last traded at S$0.745, with a market capitalization of S$601.05 million.

4) ESR REIT (SGX: J91U)

ESR-REIT has been listed on SGX since 25 July 2006. ESR-REIT invests in quality income-producing industrial properties and as at 31 December 2020 holds interest in a diversified portfolio of 57 properties located across Singapore, with a total gross floor area of approximately 15.1 million square feet and an aggregate property value of S$3.1 billion.

The properties are in the following business sectors: Business Park, High-Specs Industrial, Logistics/Warehouse and General Industrial, and are located close to major transportation hubs and key industrial zones island-wide.

For the past 3 financial years, ESR-REIT's distribution yield has seen fluctuating between 6.8% to 7.5%.

Its total distribution per unit increased from 3.85 cents to 4.01 cents in FY2019 but fell sharply to 2.80 cents in FY2020 due to the pandemic. That said, it still managed a distribution yield of 6.8% in FY2020.

ESR REIT’s unit price is last traded at S$0.41, with a market capitalization of S$1.47 billion.

5) Keppel Pacific Oak US REIT (SGX: CMOU)

Keppel Pacific Oak US REIT (“KORE”) is a United States (“US”) focused office REIT, which listed on SGX on 9th November 2017. KORE's investment strategy is to principally invest in a diversified portfolio of income-producing commercial assets and real estate-related assets in key growth markets of the United States (US).

KORE's portfolio comprises a balanced mix of 13 freehold office buildings and business campuses across eight key growth markets driven by innovation and technology in the US. KORE has a diversified tenant base, some of which are from the growth and defensive sectors such as technology, as well as medical and healthcare.

Conclusion

To summarize, REITs stand out as good dividend plays in a low interest rate environment. However, it is important for investors to keep in mind that higher distribution yields do not always indicate attractive investment opportunities because the distribution yields may be elevated as the result of a decline in the unit price.

Thus, it is also important for investors to consider other metrics of the REIT such as the sponsor’s credibility, gearing ratio and more.

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