3 S-REITs Yielding Over 6% That Dividend Lovers Can Buy Now

May 25, 2023

REITs dividends

In a market clouded by volatility and uncertainty, it is paramount for investors to secure stable and reliable income streams.

One potential source that often stands out is real estate investment trusts (REITs), specifically those REITs listed in Singapore on the SGX. These are commonly known as S-REITs.

These instruments are not only renowned for their stability but also for their exceptional tax-free dividends, which can make them a rewarding addition to your portfolio.

In this article, I’ll focus on three S-REITs that boast impressive dividend yields of 6% or higher that dividend investors can consider buying.

By investing in these three S-REITs, you stand to gain a lucrative income stream, potential capital appreciation and an added layer of diversity to your investment portfolio.

1. Keppel REIT

Commercial-focused Keppel REIT (SGX: K71U) owns 12 commercial properties with a total value of S$9.1 billion across various countries including Singapore, Australia, Japan, and South Korea.

The REIT offers a 12-month forward dividend yield of 6.8% at its current unit price.

In its latest Q1 FY2023 updates, Keppel REIT’s net property income (NPI) rose by 1.3%, reaching S$40.5 million.

However, investors are probably wary of the borrowing costs that jumped by 27.3%, leading to a 6.7% drop in income available for distribution, which amounted to S$50.2 million.

Management foresees that its all-in interest cost will trend upwards towards 3% from the 2.86% reported in Q1 FY2023.

With the strong demand for grade-A office space in Singapore, this demand should support its earnings in the near term.

Downside risks remain with the dangers from a potential global recession but with a yield of close to 7%, I believe Keppel REIT will be a good fit for long-term investors looking to build their income portfolio.

2. OUE Commercial REIT

OUE Commercial REIT (SGX: TS0U), commonly known as OUECR, is a diversified REIT with a portfolio of seven properties.

Its focus spans across the office, retail, and hospitality sectors in Singapore and Shanghai.

At its current level, the REIT boasts an attractive 12-month forward distribution yield of 6.4%.

In terms of business update, OUECR has shown a robust recovery in the Q1 FY2023 period with a significant revenue increase of 14.9% year-on-year (YoY) to S$68.4 million.

This dramatic surge is primarily attributed to augmented contributions from the Hilton Singapore Orchard, in addition to its other commercial properties in Singapore.

Correspondingly, the REIT’s net property income (NPI) reflected the recovery with an 18% YoY boost, reaching S$56.6 million.

One of the key driving factors for its strong growth is the recovery of its hospitality assets while both its office and retail properties in Singapore have remained resilient.

With the exception of Lippo Plaza in Shanghai, its assets have shown improvement in terms of their operational performance.

Considering the ongoing resurgence of the tourism industry, I remain optimistic about the continued support it will provide to OUECR’s earnings in the foreseeable future.

3. Lendlease Global Commercial REIT

Lendlease Global Commercial REIT (SGX: JYEU), or LREIT, has a portfolio comprising Jem and 313@Somerset in Singapore and Sky Complex, three grade A office buildings located in Milan, Italy.

During LREIT’s Q3 FY2023 earnings update, it revealed a stable and high committed portfolio occupancy of 99.8% for its three core assets.

During the business update for Q3 FY2023, LREIT management emphasised the stability of its portfolio, highlighting the weighted average lease expiry (WALE) of 8.3 years by net lettable area (NLA) and 5.4 years by gross rental income (GRI).

Personally, I like LREIT for its exposure to the ongoing retail recovery, its organic growth potential and the resilient balance sheet with gearing ratio and average cost of debt of 39.3% and 2.51%, respectively.

The dividend yield is also attractive for investors as its annualised DPU of S$0.049 gives dividend hunters a forward distribution yield of 7.3%.

Dividends to shelter you from market uncertainty

Investors need to build a portfolio that is resilient through different phases of market volatility.

With S-REITs that offer attractive yields, it helps to provide some buffer to our portfolios.

By looking at the above 3 S-REITs listed on the SGX, investors can buy into solid portfolios of properties while enjoying attractive dividend yields.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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