If you love getting dividends and passive income, then buying Singapore real estate investment trusts (REITs) can be a great way to generate another income stream.
However, investing into individual REITs in Singapore requires you to closely monitor how the REIT’s properties are doing and whether its strategy of acquiring new properties is adding value to shareholders.
Because that’s all going to have a direct impact on how well the REIT can grow its distribution per unit (DPU), also known as its dividend.
In Singapore, the benchmark Straits Times Index (STI) has all the biggest stocks – listed on the Singapore Exchange (SGX) – that the city state has to offer.
Generally, companies in the index are considered “blue chip” companies that are mature and reliable, with many paying dividends.
Among them are six REITs:
- CapitaLand Ascendas REIT (SGX: A17U)
- CapitaLand Integrated Commercial Trust (SGX: C38U)
- Frasers Logistics & Commercial Trust (SGX: BUOU)
- Mapletree Industrial Trust (SGX: ME8U)
- Mapletree Logistics Trust (SGX: M44U)
- Mapletree Pan Asia Commercial Trust (SGX: N2IU)
I tend to think that Singapore REITs that perform well – in terms of their total return, remember that’s share price + dividends – over the long term (say 10 years) will continue to do well.
Meanwhile, it makes sense that those REITs that perform poorly over the long term will also continue to not do so great versus the market.
With that in mind, here’s the worst-performing Singapore REIT from the Straits Times Index over the past decade.
The biggest Singapore REIT but also the worst one
CapitaLand Integrated Commercial Trust, also known as CICT, is Singapore’s largest REIT by market capitalisation.
It’s also the worst performer over the past decade, from the REITs that are part of the STI.
Remember that prior to November 2020, the REIT was known as CapitaLand Mall Trust (CMT).
Following the merger of CMT and CapitaLand Commercial Trust, CICT now owns a variety of recognisable Singapore shopping malls and office towers as well as other commercial properties in Australia and Germany.
As you can see below, over the past 10 years CICT delivered a total return for investors of +52.6%. That works out to an annualised 4.3% gain.
The real shock, though, is that the unit price of CICT has declined over the past decade, with that total return compromising completely of dividends.
The next worst-performing STI Singapore REIT was Mapletree Pan Asia Commercial Trust and even that had a positive unit price performance over the past decade.
As a side note, Frasers Logistics & Commercial Trust had to be excluded from the above as the precursor REIT to it – Frasers Logistics Trust – only went public in 2016.
Focusing on shareholder value in Singapore REITs
For me, although many of us are familiar with CICT, that does not mean it makes a great investment. That much is very clear from its past performance which has been poor, to say the least.
The total return outperformance of the other four STI REITs, versus CICT, over the past decade ranges from 36% to 140%.
If anything, it’s a lesson in that reputation does not equal performance. For investors, REIT fans, and dividend lovers alike in Singapore, it’s important for us to focus on the total return of any yield stock.
That’s been particularly true of Singapore REITs as superior DPU growth over time will also naturally lead to stronger performance in the unit price.
So, for investors looking at REITs, while the case of “bigger is better” normally rings true, it’s not the case 100% of the time.