REITs offer investors a regular income stream and is a mainstay in income investors' portfolio.
Singapore is home to one of the largest cluster of REITs worldwide and hence it is no surprise among them, there are Singapore REITs with overseas properties. Surprisingly, due to tighter regulations in valuation approaches at overseas countries, the result is these Singapore REITs with overseas properties generate sustainable dividend in excess of 8%.
Here are a few overseas REITs which gives 8% dividend or more for Singapore income investors:
Elite UK REIT
Elite UK is in the office space of the United Kingdom (UK). Most of its properties is leased to the UK government for office use, majority in the welfare segment. Its leverage ratio is at 40.7%, lower than the average S Office REITs which are at 41% and has above average occupancy rate of 97%.
Due to cap rates and valuation, it is paying 100% payout ratio and pays 2.8 pence per cents. At 34.5 UK cents, it is paying out 8.1% yield for investors who purchase it now. In recent times, its cost of debt has dropped from 4.9% to 4.8% now. DPU is expected to grow from 2.8 pence per share as cost of debt falls. Its dividend and leverage ratio are better than any Singapore office REITs including that of Keppel REIT
United Hampshire US REIT
The REIT is in the stripe mall segment of USA, catering to supermarkets and essential services goods. Its leverage ratio is at 40.0% as well, which is lower than the average leverage ratio of Singapore REITs. Occupancy rate of the REIT is above 95%
Despite the sale of a few malls, these were positive sales because it improved the distributable income available to investors. Full year DPU is 4.06 US cents, an increase of 2%. Its payout ratio is less than 100%, as the REIT keeps a portion of its distributable income for CAPEX and payment of debt.
At 49.5 cents share price, it gives an 8.2% dividend yield. Its leases are on long term basis with annual in-built rental increases. Coupled with the lower interest (SOFR) environment in USA, the REIT is expected to increase its DPU above its 4.06 US cents. The REIT manager is currently taking fees in cash and if it elects to take units instead, DPU is set to rise further at an annual increase of 2% and investors will get yields of above 8.2%
Sasseur China REIT
It has 4 malls in three Tier 2 China cities. The REIT is the lowest leveraged among Singapore REITs at 25.8% and yet it has one of the highest yields in Singapore. Full year annualized dividend is 6.1 Singapore cents at 70.5 cents which enables it give investors 8.5% dividend yield.
Surprisingly it is not paying out 100% of its distributable income, keeping a portion for CAPEX and payment of debt. It is quite normal for China REITs to be so prudent compared to Singapore Asset managers. This results in China/HK REITs having a low leverage and payout ratio. Indeed, surprising to learn that Singapore companies have a higher risk appetite than China's.
Year on year, Sasseur REIT's tenant has still seen increase in tenant sales which is good news and the REIT has occupancy rate at above 95%. The REIT too has recently refinanced its offshore debts to onshore China debts which are of lower interest rates (similar to what LINK REIT has done). This has reduced it by 10% to 4.8% average interest rates
Conclusion
The above 03 REITs are indeed unique. First, they give higher dividend than Singapore REITs with Singapore properties. Second, their leverage is lower than their Singapore peers and third, they are not paying in excess of their payout ratio like what Keppel Singapore does.
I will be keeping watch on these gems to see as and when there is opportunity to buy them.
<Author is vested in United Hampshire US REIT and keeping the other 2 in the watchlist due to their relatively low leverage ratio, sustainable payout and high dividend yield>
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