2 Singapore REITs Yielding More Than Your CPF SA

June 21, 2021

REITs dividends

Investing for our future retirement requires us to create various passive income streams. One of the best ways to generate passive income is by investing in dividend stocks.

Clearly, in Singapore a lot of the best dividend stocks are found in the real estate investment trust (REIT) sector, where owning a small piece of many properties can actually be very rewarding when compared to investing in physical property.

So, when we put money into any of our retirement accounts, such as the CPF, it’s worth asking – “how much of a return can I get”?

Even for one of the best-yielding CPF accounts, namely the Special Account (SA), the “guaranteed” yield is 4%.

But that 4% comes without the potential for price appreciation and is focused purely on compounding your initial cash.

For those of us with long-term time horizons, the ability to pick the best REITs means we have a great shot of generating long-term returns that can beat the returns of the SA.

With that in mind, here are two Singapore REITs that will provide investors with a better dividend yield than the guaranteed 4% for the CPF SA.

1. Frasers Logistics & Commercial Trust

First up there’s Frasers Logistics & Commercial Trust (SGX: BUOU), also known as FLCT, which is a logistics- and commercial-focused REIT.

It was actually the result of a merger between what used to be Frasers Commercial Trust and Frasers Logistics Trust.

With 103 properties across five countries, and a portfolio valued at S$6.8 billion, FLCT is a diversified REIT.

Not only that but during the Covid-19 pandemic, it even managed to raise its dividend, or distribution per unit (DPU).

FLCT paid out a DPU of 3.47 Singapore cents in the first half of FY 2020 (for the period ending 31 March 2020). For the second half of FY 2020, FLCT raised its DPU by 5% from the first half to 3.65 Singapore cents.

Finally, FLCT shares yield 5.4% on a trailing 12-month basis – easily beating the CPF SA rate.

2. Mapletree North Asia Commercial Trust

Mapletree North Asia Commercial Trust (SGX: RW0U), also known as MNACT, is a REIT focused on commercial and retail properties in (you guessed it) North Asia – including Hong Kong, China, Japan and South Korea.

While the REIT was hit hard by Covid-19 and Hong Kong protests, which led to the temporary closure of its leading property (Festival Walk), MNACT has bounced back.

In its most recent earnings, for the second half of FY 20/21 (for the six months ending 31 March 2021), gross revenue was up 39.7% year-on-year.

Although its DPU was only up 1.9% year-on-year to 3.299 Singapore cents, MNACT’s unit price has also bounced back by over 30% in the past eight months.

Meanwhile, MNACT has been acquiring properties to diversify its income streams away from Festival Walk (which still made up 47% of overall net profit income in its latest financial year).

For example, in late May MNACT announced a S$474.4 million purchase of a freehold office building in Tokyo, Japan.

On a trailing 12-month basis, MNACT’s shares yield a juicy 5.8% on its latest unit price of S$1.06.

Focus on long-term returns

As with any investing, we should all focus on the long term. When it comes to your CPF SA, 4% is certainly nothing to be sniffed at.

Yet if we are thinking over years, or even decades, then putting that money to work should be a preferable option given the potential gains from both dividends and share price appreciation.

Of course, we need to be cognisant of the sustainability of the dividends that are being paid out but Frasers Logistics & Commercial Trust and Mapletree North Asia Commercial Trust look to be two viable alternatives for money in your CPF SA.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Mapletree North Asia Commercial Trust.

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.

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