Navigating REIT dividends and T-bills yields: Weekly Market Recap

During our REIT webinar this week, a participant asked, "Is 5% a good dividend yield to aim for when purchasing a REIT?"

My short answer? "It depends."

If I can earn 5% p.a. through a very safe option like a high-yield savings account, I’d typically expect my REIT investments to offer a higher yield to make them worthwhile. 

On the flip side, if the T-bill yield is around 3%, I might consider high-quality REITs offering yields above that benchmark.

The key is to evaluate the available alternatives. To help, we’ve compiled the best fixed deposit rates and best savings accounts in Singapore, providing regularly updated rates so you can make an informed choice on where to park your cash.

We’ve also shared insights on what to expect for the next 6-month Singapore T-bill auction on 5 December, following the recent cut-off yield rebound to 3.08%.

If you missed our webinar, don’t worry—you can catch the replay and find out what are the prospects for Singapore REITs here. Feel free to leave a comment if there’s a question we can help answer.

Happy growing! 

Gerald, Founder of Beansprout

⏰ This Week In Markets

🏠 New rules for REITs

What happened? 

The Monetary Authority of Singapore (MAS) announced that all Singapore-listed REITs will be subject to a single leverage limit at 50%. 

All REITs must also meet a minimum interest coverage ratio (ICR) of 1.5 times at all times. 

Previously, S-REITs can borrow up to 50% of the value of its assets. The limit drops to 45% if the adjusted interest coverage ratio falls below 2.5 times.

What does this mean?

The interest coverage ratio measures the REIT’s ability to service its debt.

A REIT with a low operating income in proportion to its interest expense would have a low interest coverage ratio, and would be seen to have a lower ability to service its debt.

Why should I care? 

In our view, the announced changes are positive for the REIT sector as it gives REIT managers greater flexibility, particularly during periods when revenue may be affected by asset enhancement initiatives, redevelopment activities, or transitions in tenancy.

These changes will be especially helpful for REITs with ICR of between 1.5-2.5x, which may now have more debt headroom. Read our analysis here.

Singapore REITs bounced slightly this week, supported partly by a fall in government bond yields. 

In the meantime, US stocks rose to all-time highs, as investors were relieved by US President-Elect Donald Trump's Treasury Secretary pick.

🚗  Moving This Week

• SingPost says it is in "exclusive discussions" with a potential buyer for its Australia business, as part of its "strategic review" flagged since June this year. However, SingPost notes that there's no definitive transaction in relation to the Australia business, including any possible sale, yet.
• Sembcorp Industries has been appointed by India’s NTPC to build, own and operate a 300 megawatt (MW) wind-solar hybrid power project. Upon its completion, Sembcorp will sell power output from the project to NTPC through a power purchase agreement under a 25-year contract. This hybrid project brings Sembcorp’s renewables capacity in India to 5.4 GW.
• SATS intends to divest 49% of its interest in Saudi Arabia cargo handling subsidiary for S$52.6 million, and will continue to hold a 51% stake following the restructuring. As of 30 September, the book value of the sale shares are approximately S$21.1 million.
• IREIT Global has signed a lease contract with UK hotel chain Premier Inn for 10,348 square metres or 12 per cent of net lettable space in its Berlin Campus asset. This marks the first lease commitment as part of IReit Global’s 42 million euro project to refurbish and transform Berlin Campus into a multi-use asset with office, retail and hospitality components.
• Elite UK REIT has entered a contract to divest Hilden House, an office building in Warrington, England, for a sale consideration of £3.3 million (S$5.6 million). This represents a 6% premium above the property’s valuation of £3.1 billion as at Jun 30, 2024.

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 The Big Important Story

Will Singapore REITs finally recover in 2025?

We recently held a webinar to share our thoughts on Singapore REITs. Here's what you need to know about their outlook.

🤓 What we're looking out for next week

• Monday, 2 Dec: Singapore Savings Bond (SSB) application open
• Tuesday, 3 Dec: SIAS Corporate Connect: Sasseur REIT
• Thursday, 5 Dec: Singapore 6-month T-bill auction
• Friday, 6 Dec: US non-farm payroll data

Check out the full list of Singapore stocks, REITs and ETFs with upcoming dividend payments with our dividend calendar.

Source: SGX, Bloomberg, Refinitiv

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