Dividend Chaser on Reits picking criteria

(From Article)

Land is scarce in Singapore 

as it is a tiny island nation. 

Therefore, property rentals 

are generally and historically 

high. The Singapore REIT 

market can be categorised 

into 5 main sectors - retail, 

office/commercial, industrial/logistics and healthcare. 


Benefits of investing in REITs:
- REITs allow investors be 

like "property owners" 

without the normal hassles 

of renovation, maintenance, 

repairs, security, collecting 

rental and dealing with 

difficult tenants. It is a 

more convenient way of 

property investment for 

small investors.


- REITs provides regular 

cash flow for investors. 

Most REITs in Singapore 

distribute dividends every 

quarter.


- REITs provides attractive 

annual yields (5% - 9%) 

compared to the 

embarrassingly-low 

interest rates of banks. 


However, not all REITs 

are of good, or even 

decent quality. Therefore, 

investors must be really 

selective. Otherwise, you 

might end up like the early 

investors of Saizen REIT 

during the sub-prime crisis 

in 2008/2009. I do not 

want to bore you with the

 depressing details. 

Basically, Saizen REIT's 

stock price plunged and it 

stopped distribution for a 

long period of time T T. It is 

recovering slowly now.

 

REITs-picking Guide:
In order to help myself 

make the right decision 

while selecting REITs, I 

have a guide to picking 

REITs which I want to 

share with you all. Of 

course, feel free to make 

adjustments according to 

your personal preference ^^

1. Gearing of 30% - 35%


2. Yield 5% - 8%


3. Increasing DPU over the 

years


4. Stock price below or 

near NAV 


5. Type (retail, 

office/commercial, 

industrial/logistics and 

healthcare)


6. Geographical exposure 

(China, Singapore, 

Indonesia, Malaysia, 

Australia etc.)


Alright, let's put the 

REITs in my dividends 

portfolio to the test.

Suntec REIT:

1. Normal Gearing of 33% (excellent)
2. Yield of 6% (moderate)
3. Decreasing DPU (poor)
4. Stock price below NAV (excellent)
5. Type: Retail and Commercial (excellent)
6. Geographical exposure: Singapore (excellent)
Overall verdict: Moderate REIT


CapitalMall Trust:

1. High Gearing of 37% (poor)
2. Low Yield of 5% (moderate)
3. Stable DPU (moderate)
4. Stock price above NAV (poor)
5. Type: Retail and Commercial (excellent)
6. Geographical exposure: Singapore (excellent)

Overall verdict: Moderate REIT

CACHE:

1. Low Gearing of 23% (excellent)

2. High Yield of 8% (excellent)

3. Stable DPU (moderate)

4. Stock price above NAV (poor)

5. Type: Logistics (excellent)

6. Geographical exposure: Singapore (excellent)

Overall verdict: Excellent REIT

First REIT:

1. Low Gearing of 17% (excellent)

2. High Yield of 8% (excellent)

3. Stable DPU (moderate)

4. Stock price same as NAV (moderate)

5. Type: Healthcare (excellent)

6. Geographical exposure: Singapore and Indonesia (moderate)

Overall verdict: Excellent REIT

Parkway Life REIT:

1. Normal Gearing of 35% (excellent)

2. Low Yield of 5% (moderate)

3. Increasing DPU (excellent)

4. Stock price above NAV (poor)

5. Type: Healthcare (excellent)

6. Geographical exposure: Singapore and Japan (excellent)

Overall verdict: Excellent REIT

There is actually one more criterion when choosing a REIT - strong backing from parent company. However, I did not include this in my guide because this can be rather