Singapore Reits ride to 5-year yield high amid market jitters

SINGAPORE/BENGALURU • Dividend yields at the top Singapore-listed property trusts are at their highest in at least five years, a glittering attraction as global investors seek refuge from the slump in oil prices and jitters over China's weakest economic prospects in 25 years.

A Thomson Reuters analysis of 14 real estate investment trusts (Reits), using comparable month-end data available for the last five years, shows the median dividend yield was 6.7 per cent at end-January - the highest since at least April 2011.

The end-January spread between that yield and Singapore's 10-year government bond yield was also at its highest in that period, at 4.4 percentage points.

The yield trend offers a timely reminder of the lingering allure of investments tied to brick-and-mortar such as Reits, which typically provide stable income streams, at a time when investors are on a knife-edge amid global market turmoil and fears about the health of banks and the broader economy.

"We believe current (Reit) valuations are attractive re-entry levels and believe that large caps (large-capitalisation trusts) are likely to benefit as investors turn yield-hungry in a tepid growth environment," DBS analysts Derek Tan and Mervin Song said in a recent note.

Still, there may be clouds on the Reit horizon.

Singapore trusts face a potential office and industrial space supply glut, while some prospective tenants may hold off on new leases in the short term, bothered by the same macro-economic concerns that are plaguing financial markets.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 16, 2016, with the headline 'S'pore Reits ride to 5-year yield high amid market jitters'. Print Edition | Subscribe