Keppel DC REIT joins the Straits Times Index (STI). Worth buying at 4.4% dividend yield?

What happened?

Keppel DC REIT will be added to the Straits Times Index (STI) on 23 June 2025, marking a significant milestone for the data centre-focused REIT.

This has brought continued to cast a spotlight on Singapore REITs with datacentre assets, after CapitaLand Ascendas REIT's acquisition of two assets in Singapore, including a data-centre asset. 

Keppel DC REIT's portfolio has grown significantly from S$1 billion in 2014 to about S$5 billion as of December 2024. This has led to an increase in the dividends paid to unitholders. 

Watch our latest video as we understand the potential impact of fund inflows with the STI inclusion, and find out if Keppel DC REIT's dividend yield remains attractive. 

What you need to know about Keppel DC REIT's inclusion in the STI

Inclusion in Straits Times Index (STI)

Keppel DC REIT will be included in the Straits Times Index (STI) as part of the June quarterly review. The inclusion will be effective from 23 June 2025.

The STI, which tracks the performance of the top 30 largest and most liquid companies in Singapore, serves as a benchmark for the broader Singapore stock market. 

Banks dominate 52% of the index, performance is still heavily tied to DBS, UOB, and OCBC.

Keppel DC REIT adds to 14.8% real estate exposure, but doesn’t shift the bank-heavy nature of the index.

Significant growth in portfolio value over past decade. 

• Since its Initial Public Offering (IPO) in 2014, Keppel DC REIT has experienced substantial growth, expanding its assets under management (AUM) from $1 billion to $5 billion by the end of 2024. 

• This growth has been driven by strategic acquisitions of data centre assets across Asia Pacific and Europe. 

• The bulk of its assets are in Singapore, which represent 65.3% of its portfolio as of 31 December 2024, while Europe represents 19.3% of its portfolio. 

Distribution per unit growth supported by acquisitions

• As of Q1 2025, Keppel DC REIT continues to show strong performance, with its distribution per unit (DPU) increasing by 14.2% year-on-year to 2.503 Singapore cents. 

• This growth is largely attributed to the acquisition of two AI-ready data centres in Singapore in 2024 for approximately S$1.4 billion. 

• The two data centres, KDC SGP7 and KDC SGP8, are fully contracted by major global hyperscalers. 

• The REIT manager expects further rental uplifts and capacity expansion for these data centres, which may drive long-term growth.

Healthy occupancy rates

Keppel DC REIT's portfolio remains robust, with an occupancy rate of 96.5% in Q1 2025. 

The REIT has also seen positive rental reversions of 7% in the same period, indicating strong demand for its assets. 

Demand for datecentres in Singapore has continued grow, driven by factors such as the increasing need for cloud storage, data processing, and AI-related infrastructure. 

The REIT's tenants are primarily large, global enterprises, with its top three customers by rental income coming from Fortune Global 500 companies and hyperscalers. 

Low leverage levels

Keppel DC REIT maintains a low gearing ratio of 30.2% as at 31 March 2025, which provides ample room for potential further acquisitions without overleveraging. 

The interest coverage ratio is a comfortable 5.8 times, above the sector average.  

What would Beansprout do?

Keppel DC REIT has delivered growth in dividends per unit, supported by strong demand for data centre assets and strategic acquisitions. 

In FY2024, Keppel DC REIT stood out as one of the few REITs to grow its full-year distribution despite rising finance costs. In 1Q 2025, DPU grew 14.2% year-on-year, reflecting contribution from two recently acquired data centres. 

Its inclusion in the Straits Times Index from 23 June 2025 may further increase visibility and attract passive inflows.

In terms of valuation, Keppel DC REIT’s price-to-book (P/B) ratio is 1.5x, slightly above the sector average but in line with its historical average. 

Keppel DC REIT’s annualised 1Q25 DPU of 2.503 translates to a dividend yield of 4.4%, below its historical and sector average. 

Key risks include higher than expected interest rates, as well as higher operating costs including electricity costs. 

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Related links:

• Keppel DC REIT share price history and share price target
• Keppel DC REIT dividend yield and dividend forecasts

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