The past week was an eventful week for investors around the world. The Federal Reserve made its first interest rate decision since President Trump’s inauguration. While the US central bank cited solid job gains and rising economic confidence, the Fed voted unanimously to keep interest rate at a range of 0.5 percent to 0.75 percent. It signalled that Fed policymakers are still waiting for clarity on the possible impact of Trump’s economic policies.
Read related: View Rate Hikes Positively For The Time Being
First Non-Farm Since President Trump’s Inauguration
The non-farm payroll, an economic indicator of the US’ economic health, was also released last Friday – the first time since President Trump’s inauguration. Despite beating consensus estimate by more than 50,000, the US dollar fell in strength as investors flocked by into safe havens like Japanese Yen and gold. The main reason was the disappointing wages fall year-on-year.
With the Fed taking a less hawkish stance in its interest rate decision, should investors reconsider the down beaten REIT sector in their portfolio? As interest rates are left unchanged, dividend yields from REITs will prove to be attractive for all investors alike. While not all REITs deserves to be added into our portfolio, here are five REITs DBS highlighted that we think are worth taking a closer look.
Investors Takeaway: 5 REITs You Might Want To Own
1. Keppel DC REIT
Keppel DC REIT is one of the few REITs in Singapore that can acquire at a lower cost of capital. According to DBS analysts, the REIT is expected to gain at a five-percent Compounded Annual Growth Rate (CAGR) in “distributions supported by positive market dynamics”. There are also positives from its acquisition strategy. Keppel DC REIT’s recently completed acquisition of KDC SG 3 will support a stronger earnings growth trajectory of five percent moving forward.
BUY, TP $1.30 (SGX:AJBU)
2. Mapletree Industrial Trust
According to DBS’s report, Mapletree Industrial Trust offers high earnings visibility. It is also a REIT where DBS have confidence in the Manager to “execute on more developments to exploit its conservative balance sheet”.
Mapletree Industrial Trust’s balance sheet is currently lowly geared at around 30 percent, which is one of the lowest in the industrial REIT sector. This gives the Manager “significant debt-funded capacity for acquisitions or to undertake developments by taking part in built-to-suit projects (BTS) or asset enhancement initiatives (AEI)”. Both options implies potential upside to earnings that the market has not priced in.
BUY, TP $1.90 (SGX:ME8U)
3. Mapletree Logistics Trust
Mapletree Logistics Trust’s portfolio is managed actively and executes regular asset acquisitions. Despite being a strong quality name, Mapletree Logistics Trust still offers an attractive yield of 7.0-7.1 percent.
Furthermore, Mapletree Logistics Trust’s gearing is already at 38 percent and thus, DBS believes that the REIT is looking to monetise assets and re-deploying those proceeds into acquisitions as a key focus area in FY17-18F. DBS also noted that there are a “myriad of acquisition opportunities from its Sponsor, and third parties in Australia, Korea, and China”.
BUY, TP $1.15 (SGX:M44U)
4. Ascott Residence Trust
Ascott Residence Trust has announced around $1.2 billion worth of acquisitions over the last two years. This has led to an increase in the total value of its assets under management (AUM) by one-third to around $5 billion.
There has been a lot of concern about weakness in Singapore’s hospitality market. Nevertheless, DBS believes that Ascott Residence Trust’s diversified portfolio with “serviced residences and rental housing across 14 countries in the Asia Pacific, Europe and the US, offers investors a resilient Distribution Per Unit (DPU) outlook”.
BUY, TP $1.28 (SGX:A68U)
5. Soilbuild Business Space REIT
Among all the REITs mentioned so far, Soilbuild Business Space REIT offers a dividend yield of over eight percent – one of the highest in the industrial space. DBS believes the worst is over although operational headwinds have been a concern till recently.
Furthermore, Soilbuild Business Space REIT’s timely acquisition of Bukit Batok Connection from its sponsor group (Soilbuild Group) will “diversify the REIT’s earnings”, according to DBS. Analysts think this will help offset the potential operational headwinds from other assets in the REIT’s portfolio.
BUY, TP $0.70 (SGX:SV3U)
Learn how to pick dividend stocks with The Fifth Person’s Dividend Machines
Interested in learning how to pick out wonderful dividend stocks from the stock market? REITs are a great source of dividends but which are great? The Fifth Person has opened their popular class, Dividend Machines, targeted at helping income investors pick out dividend stocks and they have a whole segment dedicated to just REITs. At the price of US$297, you’ll be granted instant access to the full Dividend Machines training, Q&A support from trainers, training and course lifetime updates, and a full-day LIVE workshop. This is a one-time fee and there will be no sales-pitch whatsoever. Click here or the button below to learn more.