With an increasing number of large-cap S-REITs trading at or approaching relatively unattractive yield and price-to-book value, DBS suggests investors to look towards alternative dividend plays. Here are five companies that DBS has identified that fit along this theme.
Investors Takeaway: 5 Alternative Dividend Plays
- Frasers Property: Best Dividend Play Among Developers
Among developers, Frasers Property offers the highest dividend yield of five percent. This is coupled with an attractive 0.7 times price per NAV for Frasers Property. Its strong recurring income profile as a landlord in the commercial space that is strengthened by its recent catalysts: Acquisition of PGIM Real Estate Asia Retail Fund, news on interested parties to acquire its newly completed Frasers Tower, and the latest draft URA Master Plan 2019 that focuses on the redevelopment of CBD and potential higher plot ratio.
BUY, TP $2.30; Current share price $1.79
- Netlink Trust: Awaiting Multiple Catalysts To Drive Yield
With the rising adoption of fibre (90 percent) in Singapore and increasing Smart Nation projects in the long term, Netlink NBN Trust is expecting to grow distributions at CAGR of three percent from FY19-FY21F. Another catalyst for Netlink NBN Trust is StarHub’s accelerated migration to fibre which will further give a boost to Netlink NBN Trust’s topline.
Besides having multiple catalysts, Netlink NBN Trust is also a fundamentally sound investment as a dividend play. Plus, Netlink NBN Trust’s distributions are largely independent of the economic cycle. It also has ample debt headroom to fund future growth with gearing less than half of the S-REITs industry average.
BUY, TP $0.87; Current share price $0.815
- Singtel: Keeping Faith With The Dividend Stalwart
As a utility stock, Singtel has always been a stronghold in dividend investors’ portfolio. Right now, SingTel has a dividend yield of 5.7 percent. With regional associates’ earnings beginning to rebound after two years of decline led by potential reduction in losses at Bharti, Singtel has the potential to achieve a dividend yield that is higher than forecasted. The current discount to its NAV also gives investors a margin of safety for investing in Singtel for the medium term.
BUY, TP $3.55; Current share price $3.13
- Frasers Commercial Trust: Silver Lining In The Cloud
Frasers Commercial Trust share price has taken a hit over the past 1.5 years due to the loss of HP as an anchor tenant at Alexandra Technopoint. Recently, press reports have been speculating that the vacant space may be backed filled by Google. This could act as a re-rating catalyst for the stock if it happens. Another upside risk for Frasers Commercial Trust is its strong balance sheet, which gives it ample of debt headroom to fund yield accretive acquisitions. Frasers Commercial Trust is currently yielding 6.4 percent, which is already two percent higher than large cap office S-REITs with potential catalysts contributing to upside risk for investors.
BUY, TP $1.70; Current share price $1.47
- Keppel-KBS US REIT: High Dividend Yield In A Upturn Environment
According to DBS, Keppel-KBS US REIT is currently trading at attractive valuations of about ten percent discount to book value. This is despite Keppel-KBS US REIT being in an office upturn environment and commanding a high 8.3 percent yield. While the manager of Keppel-KBS US REIT has guided for an average high single-digit rental reversion for leases due for renewal in 2H19, market watchers like CoStar are forecasting 1-7 percent increase in spot rents across Keppel-KBS US REIT’s key markets. A higher than expected rental reversion will add positive upside risk to Keppel-KBS US REIT’s unitholders.
BUY, TP US$0.80; Current share price US$0.74