REITs, Stapled and Business Trusts Offer High Yields

OREANDA-NEWS. March 31, 2015. Dividend and yield stocks have remained in focus amid expectations that the Federal Reserve will raise rates slowly and cautiously this year. Rising interest rates affect REITs because they increase borrowing costs and could result in lower distribution per unit (DPU) yields and reduced asset values.

Singapore is the largest Real Estate Investment Trusts (REITs) hub in Asia Pacific ex-Japan, with 28 REITs, 11 Business Trusts and six Stapled Trusts listed on SGX, reflecting total market capitalisation of more than \\$92 billion. Over 70% of the REITs and property trusts own assets across Asia and Europe.

REITs invest in a wide range of diversified real estate assets such as office, residential, retail, hospitality, industrial properties or hi-tech parks. REITs listed on SGX that distribute at least 90% of their distributable income to the unit holders are granted tax transparency by IRAS and taxed only in the hands of unit holders.

As maintained by the Monetary Authority of Singapore (MAS), a Business Trust is a trust that runs and operates a business enterprise. Registered Business Trusts must have a trustee-manager whose role is to safeguard the interests of beneficiaries (referred to as ‘unit holders’ under the Business Trusts Act) of the trust and to manage the business of the trust (click here for more information).

Business Trusts offer investors a way to invest in cash-generating assets, including infrastructure, real estate and transportation assets. The 11 Business Trusts are made up of four Property Trusts, four Infrastructure Trusts, two Shipping Trusts and a Specialty Trust. The Property Trusts are Ascendas India Trust, Indiabulls Trust, Religare Health Trust and Croesus Retail Trust. The Infrastructure Trusts also consist of four trusts - CitySpring Infrastructure Trust, Keppel Infrastructure Trust, Hutchison Port Trusts and Asian Pay TV Trust. The Shipping Trusts comprise Rickmers Maritime and First Ship Lease Trust. The only specialty trust is Accordia Golf Trust.

The 28 REITs listed on SGX have averaged a 4.6% YTD gain, while the 11 listed Business Trusts have averaged a 4.5% YTD advance, bringing their average one-year total return to 18.4% and 15.4% respectively. The six listed Stapled Trusts have posted an average 2.1% YTD gain, taking their average one-year total return to 10.5%.

The average dividend yield for REITs is 6.2%, with 6.7% for Business Trusts, and 7.3% for Stapled Trusts, all of which are more than twice the yield of the Singapore Fixed Income Index (SFI) at 2.9%.

Since the Federal Reserve meeting on 18 March, the 28 REITs have seen an average gain in price of 2.1%, while the Business Trusts gained 1.1% and the Stapled Trusts gained 0.7%. Details of the 28 REITs, 11 Business Trusts and six Stapled Trusts can be found in the tables below.

28 REITs

Source: S&P Capital IQ & SGX StockFacts (data as of 27 March 2015)

11 Business Trusts

Source: S&P Capital IQ & SGX StockFacts (data as of 27 March 2015)

6 Stapled Trusts

Source: S&P Capital IQ & SGX StockFacts (data as of 27 March 2015)