4 Retail REITs offering dividend yields of above 5.5%
REITs
By Gerald Wong, CFA • 10 May 2024
Why trust Beansprout? We’re licensed by the Monetary Authority of Singapore (MAS).
We highlight four retail REITs with a dividend yield of above 5.5%, including Frasers Centrepoint Trust and Lendlease REIT.
What happened?
During our recent webinar on “What’s next for Singapore REITs?”, I received many questions on retail REITs.
This might be because retail REITs are seen to be resilient, especially with consumer spending in Singapore remaining healthy.
As a result, most of the retail malls in Singapore continue to have fairly high occupancy.
This is in contrast to some industrial REITs with datacentre exposure such as Keppel DC REIT and Digital Core REIT, which have seen tenant defaults over the past year.
Earlier, I shared that CapitaLand Integrated Commercial Trust as one of the few REITs that managed to raise its dividends in 2023.
In this post, I will be shining the spotlight on four Singapore-listed retail REITs with dividends yields higher than 5.5%.
Four retail REITs with dividend yields of more than 5.5%
#1 – Frasers Centrepoint Trust
Frasers Centrepoint Trust, or FCT for short, is a suburban retail mall with a portfolio of nine retail malls and one office building.
Its retail portfolio spans around 2.7 million square feet of net lettable area (NLA) and the total portfolio is worth approximately S$7.1 billion as of 31 March 2024.
Frasers Centrepoint Trust recently released a resilient set of earnings for the first half of fiscal 2024 (1H FY2024) ending 31 March 2024.
Gross revenue fell by 7.2% year on year to S$172.2 million while net property income (NPI) tumbled 8.4% year on year to S$124.6 million.
The fall in both revenue and NPI was mainly because of the absence of Changi City Point which was sold in October 2023, along with lower contributions from Tampines 1 Mall which is undergoing an asset enhancement initiative (AEI).
If these two malls were excluded, Frasers Centrepoint Trust would have registered year-on-year growth of 2.9% and 2.1%, respectively, for revenue and NPI.
The retail REIT’s distribution per unit (DPU) clocked in at S$0.06022, dipping by just 1.8% year on year.
Frasers Centrepoint Trust’s trailing 12-month DPU stood at S$0.12042, giving its units a trailing distribution yield of 5.6% at a unit price of S$2.15.
The REIT’s committed occupancy stood high at 99.9% while its portfolio enjoyed positive rental reversion of 7.5% for 1H FY2024.
With its gearing at just 38.5%, the REIT still has sufficient debt headroom to use loans for more yield-accretive acquisitions.
The Tampines 1 AEI is proceeding smoothly with works on track for completion by September 2024.
Meanwhile, Tampines 1 has already secured more than 99% leasing commitment with new store concepts such as the first Lenskart Studio concept in Asia.
Find out how much dividends you would have received as a shareholder of Frasers Centrepoint Trust in the past 12 months with the calculator below.
Learn more about Frasers Centrepoint Trust: Frasers Centrepoint Trust joins the STI: 5 things to know about the 'king of heartland malls'
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#2 – Sasseur REIT
Sasseur REIT is a retail outlet mall REIT with four outlet mall assets located in Chongqing, Kunming, and Hefei.
Its sponsor, Sasseur Group, manages 17 outlets and has two outlets, Sasseur Xi’an and Sasseur Guiyang, over which Sasseur REIT has a right of first refusal.
The total combined NLA of these four malls was 310,241 square metres as of 31 December 2023.
Sasseur REIT’s malls performed well last year with a total rental income of RMB 685.5 million, up 10.7% year on year.
The Chinese retail REIT reported a high portfolio occupancy of 97.6% with total outlet sales jumping nearly 32% year on year to RMB 4.7 billion.
Sasseur REIT has one of the lowest gearing ratios among the S-REITs at just 25.3%.
However, the REIT’s distributable income fell by 5.8% year on year mainly because of the strong Singapore dollar and higher finance costs.
Consequently, DPU dipped by 4.6% year on year to S$0.06249.
Excluding currency effects, DPU would have been 4.1% higher year on year.
Sasseur REIT’s DPU of S$0.06249 means its shares provide a trailing distribution yield of 9.1%.
Find out how much dividends you would have received as a shareholder of Sasseur REIT in the past 12 months with the calculator below.
Related links:
Learn more about Sasseur REIT: kopi-C with Sasseur REIT’s CEO: ‘Consumption downgrade benefits us’
#3 – Paragon REIT
Paragon REIT has a portfolio of five retail malls in Singapore (3) and Australia (2).
Its properties in Singapore include Paragon, Clementi Mall, and the Rail Mall while its Australian assets include a 50% interest in Westfield Marion Shopping Centre and an 85% stake in Figtree Grove Shopping Centre.
The retail REIT reported a mixed set of results for 2023 with gross revenue inching up 1.8% year on year to S$288.9 million.
NPI rose 1.7% year on year to S$215.1 million but DPU declined by 9.1% year on year to S$0.0502 because of higher interest expenses.
The REIT recently released its 1Q 2024 business update where gross revenue increased by 3% year on year to S$73.8 million.
Portfolio occupancy as of 31 March 2024 stood high at 98.1%.
Paragon REIT had very low gearing of just 29.9% with 85% of its loans pegged to fixed rates.
The REIT has a right-of-first-refusal on Woodleigh Mall that opened in May last year that could potentially be injected once rental income stabilises.
At a unit price of S$0.84, shares of Paragon REIT yield 6%.
Find out how much dividends you would have received as a shareholder of Paragon REIT in the past 12 months with the calculator below.
Related links:
#4 – Lendlease Global Commercial REIT
Lendlease Global Commercial REIT, or LREIT for short, invests in a portfolio of properties that are used for retail and/or office purposes.
Its portfolio consists of Jem, 313 @ Somerset, and a 10% stake in Parkway Parade in Singapore and a freehold interest in Sky Complex office buildings in Milan, Italy.
The retail cum commercial REIT recently reported operating metrics for its third quarter of fiscal 2024 (3Q FY2024) business update for the period ending 31 March 2024.
Portfolio committed occupancy stood at 88.8% with retail rental reversion coming in strong at 15.3% for the year-to-date.
Tenant sales improved by 2.6% year on year for 3Q FY2024 while tenant retention rate by net lettable area stood high at 86.2%.
Lendlease REIT had a gearing ratio of 41% as of 31 March 2024 with 61% of its loans hedged to fixed rates.
Looking ahead, the REIT will rely on proactive asset management to improve the operating performance of its assets while managing its capital prudently to keep costs low.
Lendlease REIT paid out a DPU of S$0.021 for the first half of fiscal 2024, down 14.5% year on year.
Together with its FY2023 DPU of S$0.047, the REIT’s trailing 12-month DPU stood at S$S$0.0435, giving its units a trailing distribution yield of 7.8%.
Find out how much dividends you would have received as a shareholder of Lendlease REIT in the past 12 months with the calculator below.
Related links:
- Lendlease Global Commercial REIT share price and analysis
- Lendlease Global Commercial REIT dividend history
Learn more about Lendlease REIT: ESG Brew with Lendlease REIT’s CEO: ‘I live more sustainably by taking public transport’
What would Beansprout do?
Although REITs may face some headwinds due to elevated interest rates, there are still pockets of opportunities for investors who are willing to do their homework.
In particular, Retail REITs have been demonstrated resilience in previous periods of economic uncertainty.
Amongst the retail REITs mentioned above, Frasers Centrepoint Trust is the only REIT that has 100% of its assets in Singapore.
This has allowed its distributions to have held up better compared to the other three retail REITs.
This would make Frasers Centrepoint Trust a retail REIT we would look at if we are looking for resilient REITs to add to our dividend portfolios.
To learn more about our assessment of the outlook of Singapore REITs, check out our recent webinar on “What’s next for Singapore REITs”
If you are interested to learn about income opportunities in the Singapore market, join our upcoming webinar on 14 May 2024 to find out how you can identify these opportunities.
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