Better Dividend REIT: Mapletree Logistics Trust vs. Frasers Logistics & Commercial Trust

Singapore REITs buy

Tim Phillips

November 22, 2022

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In Singapore, we love to invest for dividends. There are many reasons for that but one big factor is that dividend payments in Singapore are completely tax free.

Another key reason is that dividend stocks traditionally hold up better in a widespread market sell-off, like the one we’re currently going through.

Of course, in the local market Singapore REITs are some of the most popular dividend investments. But it’s key to remember that many investors buy REITs for the reliable income streams.

In that sense, the sustainability and grow of the dividend are crucial.

Many of us might want to build a passive income portfolio and some older investors may even rely on these REIT dividend payments for day-to-day expenses.

Two of the biggest REITs on the Singapore Exchange are both constituent stocks of the Straits Times Index too; Mapletree Logistics Trust (SGX: M44U) and Frasers Logistics & Commercial Trust (SGX: BUOU).

But for REIT investors, which is the better dividend stock out of the two? Let’s find out.

Distribution growth

One of the biggest metrics for REITs, and their income suitability, is the growth of the distribution (or dividend) payout.

First off, Frasers Logistics & Commercial Trust – also known as FLCT – has only been listed since 2016 so the track record to measure this dividend growth is relatively short.

Regardless, for FLCT’s FY2017 (for the 12 months ending 30 September 2017), the REIT paid a distribution per unit (DPU) of 7.01 Singapore cents.

For its latest FY2022, FLCT paid out a DPU of 7.62 Singapore cents. That amounts to a compound annual growth rate (CAGR) of 1.7% in its DPU.

As for Mapletree Logistics Trust – also known as MLT – the REIT paid out a DPU of 7.44 Singapore cents for its FY2016/2017 (for the 12 months ending 31 March 2017).

In its latest full-year FY2021/2022, MLT paid out a DPU of 8.787 Singapore cents. That means the REIT has a five-year dividend CAGR of 3.4%.

Winner: Mapletree Logistics Trust

Gearing and cost of debt

For REITs, the ability to grow the portfolio is important in terms of expanding payouts for shareholders.

Meanwhile, the cost of debt can impact the bottom line and, thus, the amount distributed to shareholders as dividends – particularly in this high interest rate environment.

At the end of the day for REIT investors it’s a case of “the lower, the better” on both metrics.

FLCT had a very healthy gearing ratio of 27.4% as of 30 September 2022 while its cost of borrowings was just 1.6%.

As for MLT, the REIT had a gearing ratio of 37.0% as of 30 September 2022. Meanwhile, its average annualised interest rate was 2.5%.

Winner: Frasers Logistics & Commercial Trust

Debt maturity profile

As interest rates climb, and look to stay elevated, it’s going to be crucial how a REIT’s debt maturity profile looks.

That’s because, eventually, a REIT will have to roll over a loan and when they do, it’s nearly certain it’ll be at a much higher rate.

While FLCT only has 8% of its total gross borrowings due in FY2023, that steps up sharply in FY2024 and FY2025. Overall, from FY2023-2025, the REIT has 65.8% of its total gross borrowings coming due.

Meanwhile, MLT has 7% of its total debt coming due for the remaining six months of its FY2022/2023. If you stretch that out to FY2025/2026 – so over the next 3.5 years in total – the REIT will see 50% of its overall debt coming due.

Winner: Mapletree Logistics Trust

Dividends and REITs with staying power

For dividend investors who like to buy REITs, it’s important to focus on the sustainability of their distribution growth.

So, while DPUs may negatively impacted in this environment, we can get a sense of how well specific REITs can handle it based on their track record.

Based on the above, for Singapore investors, it appears that Mapletre Logistics Trust is the better dividend REIT when compared to Frasers Logistics & Commercial Trust.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Mapletree Logistics Trust.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.