2 Singapore Retail REITs to Buy Now and Hold Forever

June 1, 2023

For investors, there’s still uncertainty out there over whether the US Federal Reserve has one more interest rate hike left.

However, nearly everyone can agree that the worst of the rate hikes are now behind us. As a result, perhaps it’s an opportune time to take a look at Singapore’s REITs.

That’s because REITs listed on the SGX, like elsewhere, suffered in 2022 as interest rate hikes went up in a “fast and furious” manner.

Yet post-Covid, the retail scene in many parts of the world (including Singapore) remains relatively healthy. That is positive for retail REITs.

So, with that in mind, here are two retail REITs listed on the SGX that dividend investors can buy now and hold forever.

1. Frasers Centrepoint Trust

Up first is a bedrock of Singapore’s retail scene – Frasers Centrepoint Trust (SGX: J69U). the retail REIT owns a host of suburban “heartlands” malls in Singapore, including the likes of Waterway Point, Hougang Mall, and Changi City Point, among others.

In H1 FY2023 (for the six months ending 31 March 2023), Frasers Centrepoint Trust saw its net property income (NPI) rise 5.7% year-on-year to S$137.96 million.

Meanwhile, its distribution per unit (DPU) of 6.13 Singapore cents for H1 FY2023 was pretty much flat – down marginally by 0.1% year-on-year.

This was mainly down to higher property expenses but the REIT has done well to virtually keep its dividend flat when a lot of other S-REITs are cutting theirs in this environment.

The REIT stated that its retail portfolio’s tenants’ sales and shopper traffic are both trending upwards and displayed strong growth in H1 FY2023 versus the prior-year period.

Based on the essential services and goods that its tenants provide, the REIT set looks to be a relative outperformer in an environment where recession is a possibility.

At its current share price of S$2.18, Frasers Centrepoint Trust is giving REIT investors a 12-month forward dividend yield of 5.6%.

2. Sasseur REIT

Second is China mall outlet-focused Sasseur REIT (SGX: CRPU). The REIT has four key outlet assets in China and has seen a solid recovery in its latest quarter.

Indeed, with the recovery of the Chinese economy and shoppers back outside visiting physical stores, Sassuer REIT’s malls have benefitted.

The REIT’s latest Q1 2023 results showed that its DPU was up 1.5% year-on-year to 1.849 Singapore cents. It also happened to be the highest ever first-quarter DPU for the REIT since it listed.

Management attributed this to strong outlet sales growth for the quarter – which was up 17.9% year-on-year to RMB 1.3 billion (S$247.2 million).

Its Hefei outlet’s sales were higher during the period than the pre-Covid Q1 2019 period, highlighting how the REIT is seeing a return of shoppers to its properties.

While the broader recovery in the Chinese economy is bumpy, the return of physical shopping seems set to continue apace.

With its current share price of S$0.74, Sasseur REIT is offering a compelling 12-month forward dividend yield of 10%.

Investors should also remember that the REIT is one of the few in Singapore to pay out dividends quarterly – so four times a year.

Focus on retail’s longevity in S-REITs

For income investors, certain REIT sectors have suffered. That’s particularly true of something like office REITs, with many hybrid working models threatening demand.

Yet in the retail sector, demand for physical space appears robust in many parts of Asia.

By having a combination of Singapore and China retail, investors can mix stable yield (Frasers Centrepoint Trust) with a bit more of a high-yield retail option (Sasseur REIT).

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

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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