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10 Singapore REITs to Invest In: A Thorough Guide, Dividend Performance

singapore reits dividend
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Investing in real estate is one of the main objectives for investors in Singapore. This is where REITs, a class asset known to yield yields, come in. REITs are one of the best ways to generate passive income for new real estate investors.

Real Estate Investment Trusts of REITS are intelligent investments to diversify your portfolio since they are very liquid. They can also be traded on the Singapore Exchange (SGX) and are licensed by the Monetary Authority under the Securities and Futures Act. Some REITs have properties from overseas, thus exposing you to the global market.

What are REITs?

REITs are companies that operate, own, or finance income-generating real estate. They are modeled after mutual funds since they pool the capital of different investors. Pooling enables individual investors to earn a dividend from their real estate investments without managing, buying, or financing the properties.

Singapore REITs are listed companies similar to how you would buy shares from any SGX-listed company. While listed companies use the investors’ money to run businesses, REITs use the investors’ money to operate, buy and manage the property.

When you decide to invest in Singapore REITs, you invest in the properties managed by the REIT. In short, you become a part-owner of the business parks, shopping malls, or whatever property the REIT manages.

Singapore has the largest number of REITs in Asia. S-REITs are an important component of the SGX. The S-REIT market has grown at a compound annual growth rate of 13% over the past decade.

What Are the Different Types of REITS?

Here are the different types of REITs and how you can invest in them:

1. Retail REITs

At least 24% of most REIT investments are in freestanding retail and shopping malls. It is the most preferred type of REIT in Singapore. Most shopping center you frequent is owned mainly by a REIT.

Before you decide to invest in the retail industry, you need to examine the industry first. Ask yourself it is a healthy form of investment and what is its future projection.

Remember that retail REITs make money from the rent charged to the tenants. So if the tenants are not making enough money due to poor sales, they might default on their monthly payments. Therefore, it is essential to invest in REITs that have the most vital tenants.

2. Residential REITs

Residential REITs operate and own multi-family rental apartments building and manufacturing housing.

There are several factors to consider before investing in this type of REIT, including the buildings’ location and the area’s population and job growth rate. It is important to note that most of these REITs have investments in urban areas,

3. Healthcare REITs

Health REITs invest in real estates such as medical centers, hospitals, retirement homes, and nursing facilities. The success of these investments is directly tied to the healthcare industry. Operators of these facilities rely on Medicare, occupancy fees and Medicaid reimbursements, and private pay.

4. Office REITs

These invest in office buildings and data centre assets and receive rental income from tenants who have signed long-term leases. When deciding to go for office REITs, you have to look at the state of the economy, the vacancy rate, and how much capital the property has for acquisition. Make sure you find REITs that have already invested in solid economic holds.

5. Mortgage REITs

Around 10% of REITs investments are mortgages as opposed to real estate. Mortgage REITs also come at their own risk. For example, an increase in interest rate would mean that there would be a decrease in mortgage REIT book values.

Young couple holding a white miniature house in living room

How Do REITs Earn Dividends?

You can expect it to yield between 5% and 8% annually when you invest in REITs. The dividends are paid quarterly or every six months. REITs have such high returns because they must redistribute 90% of their taxable income every year. Their payouts are in dividends – most investors like REITs since they have a steady recurring income.

The share price of the REIT can go up or down, the same as regular stocks. REITs took a massive hit during the COVID-19 pandemic, but some continued to pay huge dividends. Investors do not mind the tradeoff, but you need to be aware of the price changes to know when to sell off your REIT.

How Do You Spot a Good Performing REIT?

REITs are property investments that differ from traditional real estate investments but trade the same as stocks. With REITs, you are investing in income-generating properties.

The similar exhibit behavior with stocks like exchange trading, provide dividend and are very liquid. REITs are analyzed the same as stocks but have very few differences. With most investments, you need to do your due diligence before investing.

Here are some of the things that you must look out for before putting your money in REITs:

1. The State of the Economy

The state of the economy is one of the most critical factors that affect stocks and REITs. Strong economic growth is a good thing. Most REITs have mandates on specific sectors such as industrial, commercial, healthcare, retail, and hospitality. Meaning you are best placed to understand the industry’s outlook of interest and the future performance of the REIT.

2. Frequency of Payouts and Yield

Another critical factor is the growth prospects and risk potential of the REIT. Historical yields are calculated by taking the dividend per unit or the distribution of the REIT to the investors divided by the current stock market price.

A high yield indicates a lower chance of stable distribution and does not make a particular yield attractive. In the same way, lower yields are not an indication that the REIT is less valued but a safer investment. 

The frequency of the payouts affects how investors choose to invest in REITs. Some investors prefer a regular payout, while others prefer one that pays semi-annually.

3. The Interest Environment

Increased interest rates make REITs, dividend income, and bonds less attractive. The higher the interest environment makes high-yielding dividend yields less attractive to hold cash deposits and other fixed-income securities. If there is speculation for future changes in interest rates, REITs often face high price volatility.

4. Weighted Average Lease Expiry (WALE)

WALE is a metric used to measure the health of a REIT. It estimated the time of expiry of the existing leases in a REIT based on the tenant’s area and the rent they pay to the REIT. If the WALE is 5.0, the current leases have an average of 5 years before the end of the contract.

A longer WALE assures investors during an economic downturn since the tenants are locked into their agreements for longer.

5. Net Asset Value (NAV)

NAV is the difference between the total assets and liabilities per unit basis. It is another standard metric used to value REIT. NAV is indicative of the value of the REIT per unit basis.

6. Funds from Operations (FFO)

FFO is used to establish the cash flow from the operations of a REIT. It measures the net amount of cash equivalents that flows into a REIT. It is also cited as one of the most important metrics you must understand when investing in REITs.

Should I Invest in a REIT Portfolio?

Yes.

Here are some of the reasons why you should consider investing your money in REITs

1. REITs Generate a Passive Income with High Dividend Yields

REITs have a dividend yield that ranges from 4 % to 8%. This makes them appeal to investors looking for a passive income. REITs have a significant yield since they distribute 90% of their taxable income every year.

2. To Diversify Your Investment Portfolio

Diversification is crucial for any investor. It helps spread your risk by spreading your investment across different asset class, geographies, and industries. REITs can form a section of your investment hence providing exposure to real estate while generating passive income.

3. REITs are Affordable

Most people do not have all the millions required to purchase a commercial building, and that is why REITs exist. They allow retail investors to invest in huge properties at an affordable price traded on the SGX.

4. High Liquidity

REITs offer high liquidity since you can buy and sell REITs on the SGX any time you want to.

Find out more on how to buy REITs in Singapore!

10 Best REITs To Invest in Now

Singapore REIT Type Market Cap Distribution Per Unit(Cents Per Unit) Dividend Yield
Ascendas Real Estate Investment Trust Industrial S$12.4 billion 14.4 4.67
Ascott Residence Trust, or Ascott REIT Hospitality S$3.3 billion 3.03 2.89
CapitaLand Integrated Commercial Trust Retail & Commercial S$14.3 billion 6.95 3.2
Frasers Centre Point Trust Retail S$3.9 billion 9.0 3.6
Lendlease REIT Retail & Commercial S$950 million 2.34 5.1
Keppel REIT Commercial S$4.4 billion 5.73 4.7
Keppel DC REIT Industrial (Data Centres) 4.8 billion 9.17 3.4
Mapletree Industrial Trust Industrial REIT,

Property trusts

S$6.6 billion 12.2 4.34
Mapletree Logistics Trust Industrial, Logistics S$8.9 million 8.1 4.2
Parkway Life REIT Healthcare S$2.92 billion 13.8 3.3

Related Questions

1. Can You Lose Money with REITs?

There is a risk of loss with any other type of investment. Publicly traded REITs and dividend stocks are at the risk of losing value as the interests rise, which sends the investment capital gains into bonds.

2. Are REITs Safe During an Economic Recession?

Certain types of REITs and dividend stocks do not perform very well during an economic downturn. REITs in hospitality and retail are hit the worst during a recession.

3. Which REIT Should I Invest In?

REITs and dividend stocks come with their own upside and risk depending on the economy’s risk. REIT ETFs are another excellent way for investors to invest in the sector without being content with the complexities. A good example is the iEdge S-REIT index in Singapore.

Conclusion

Singapore REITs and dividend stocks are a great addition to your portfolio. They guarantee regular payouts and high payouts. Before you decide to invest in a REIT, make sure you fully understand the economic market and the types of the REIT you are investing in.

Key Takeaways

  • REITs are similar to stocks and are traded on the Singapore Exchange.
  • REITs focus on specific sector properties such as health, hospitality, retail, and shopping centers.
  • REITs and dividend stocks offer high yields since they must pay 90% of their taxable income to their shareholders.

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