3 Singapore REITs that raised their dividends despite industry headwinds

What happened?

If you are a REIT investor, you would probably have noticed that Singapore REITs mostly reported lower distributions in the third quarter. 

The lower distributions have partly led to weakness in the share price of Singapore REITs, with the iEdge S-REIT index declining by 9.0% year-to-date as of 31 October 2023. 

Some REITs such as Mapletree Pan Asia Commercial Trust and Lendlease REIT also fell to multi-year lows in recent months. 

Singapore REITs have been facing the twin headwinds of high inflation along with surging interest rates.

Higher interest rates impact REITs by raising their borrowing costs, resulting in sharply higher finance expenses that eat into distributable income.

With surging inflation, REIT operating expenses will also see a jump as higher utility, maintenance and staff costs eat further into distributable income.

Hence, many REITs may struggle to report higher distributions per unit (DPU) as the combination of these two headwinds leads to lower distributable income.

Despite the tough conditions, three Singapore REITs have bucked the trend by reporting higher DPU in their latest earnings release.

Let us find out which are these Singapore REITs which have been able to grow their DPU. 

Three Singapore REITs that raised their dividends despite industry headwinds

#1 – Mapletree Logistics Trust (SGX: M44U)

Mapletree Logistics Trust, or MLT, is a logistics REIT with a portfolio of 189 properties in countries such as Singapore, China, Australia, and Japan.

Its assets under management (AUM) stood at S$13.3 billion as of 30 September 2023 and is managed by a wholly-owned subsidiary of investment firm Mapletree Investments Pte Ltd.

The REIT reported its fiscal 2024 first half (1H FY2024) earnings ending 30 September 2023.

Gross revenue and net property income (NPI) dipped by 0.7% and 1%, respectively, to S$368.9 million and S$320.1 million.

Despite the decline, DPU for 1H FY2024 inched up 0.5% year on year to S$0.04539.

MLT’s trailing 12-month DPU stood at S$0.09034, giving its units a trailing 12-month distribution yield of 5.7%.

The REIT maintained a high portfolio occupancy rate of 96.9% but saw its average rental reversion dip to just 0.2% from 4.2% in the previous quarter.

The lower reversion was largely because of the Chinese properties within the REIT’s portfolio.

The REIT manager continues to be active in capital recycling, with a total of five divestments announced in the second quarter in Malaysia, Singapore, and Japan.

In early November, MLT also announced two more divestments.

The first was that of Tuas Avenue 3 for S$11.1 million while the second was for two properties in Malaysia for RM 151.2 million.

The REIT is also fresh from completing the acquisition of eight properties in Tokyo, Sydney, and Seoul for S$904.4 million.

This active capital recycling may help MLT to mitigate some of the impacts of inflation and higher interest rates.

With the slight increase in distributions, MLT’s share price has been fairly resilient so far this year, with a total return of 6.9% as of 22 November 2023. 

This has allowed MLT to outperform the Straits Times Index (STI), which saw a 4% decline over the same period. 

#2 – Parkway Life REIT (SGX: C2PU)

Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 61 properties in Singapore, Japan, and Malaysia worth S$2.2 billion.

For the first nine months of 2023 (9M 2023), PLife REIT saw gross revenue jump 24.6% year on year to S$110.9 million, boosted by higher rent from a new master lease agreement for its three Singapore hospitals along with contributions from the acquisition of five nursing homes in Japan.

NPI improved by 26.2% year on year to S$104.5 million with DPU edging up 2.8% year on year to S$0.1099.

PLife REIT has an impressive track record of uninterrupted core DPU increases since its IPO in 2007.

The healthcare REIT had just concluded the acquisition of two nursing homes in Japan on 27 October for around S$16.4 million.

This purchase should help to further boost its DPU in the coming year.

The revised master lease agreements should also provide rental income uplift as there is a variable rent component and the lease is pegged to the consumer price index.

By 2026, the rent payable is projected to rise by 24% year on year because of step-up clauses.

PLife REIT intends to build up a third key market so that it can continue to grow its asset base and DPU.

Despite the consistent increase in distributions, PLife REIT’s share price has declined year-to-date, generating a total return of negative 2.9% as of 22 November 2023.

This might because its forecasted dividend yield of 4.15% may appear less attractive to investors compared to other lower-risk assets such as Singapore Savings Bonds. 

#3 – Frasers Hospitality Trust (SGX: ACV)

Frasers Hospitality Trust, or FHT, is a hospitality trust with a portfolio of 14 assets in nine cities in Asia, Australia, and Europe.

The value of these properties was S$1.93 billion as of 30 September 2023.

Earlier, we shared that Frasers Hospitality Trust may benefit from the sharp recovery in travel and tourism.  

The higher demand for its hospitality assets were seen in its fiscal 2023 (FY2023) earnings for the year ending 30 September 2023.

Gross revenue jumped 28.5% year on year to S$123.2 million while NPI climbed 30.1% year on year to S$90.5 million.

Distribution per stapled security (DPSS) surged 49.3% year on year to S$0.024426, giving FHT’s units a trailing distribution yield of 4.8%.

Meanwhile, FHT also disclosed that its portfolio’s valuation rose 1.7% year on year to S$1.93 billion as of 30 September 2023, attesting to the high quality of its portfolio.

The trust’s gearing remained low at just 34% with an effective cost of borrowing of 3.1%.

The manager of FHT intends to unlock value for unitholders via divestments while scouting for yield-accretive acquisitions to enhance overall returns.

With such a strong bounce in its distributions, it is no wonder that Frasers Hospitality Trust is the best-performing REIT year-to-date with a total return of 18% as of 22 November 2023. 

What would Beansprout do? 

The share price performance of Singapore REITs has improved in recent weeks with the decline government bond yields. 

However, as we have seen from the examples above, it is still important to select REITs that have strong operational performance and are able to grow their distributions despite elevated interest rates. 

Apart from looking at their fundamental strength, we will also examine their financial strength and valuation.

To learn more about how to choose the best REIT for your portfolio, check out our complete guide to Singapore REITs. 

Also, use our REIT comparison tool to compare Mapletree Logistics Trust, Parkway Life REIT and Frasers Hospitality Trust with other REITs. 

Related links:

• Mapletree Logistics Trust analysis and dividend history
• Parkway Life REIT analysis and dividend history
• Frasers Hospitality Trust analysis and dividend history 

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