For long-term investors in Singapore who rely on the income from dividends, Covid-19 was an uncertain time.
That’s because a lot of Singapore companies, including real estate investment trusts (REITs), had to cut their dividend payouts to shareholders in the face of lockdowns.
That’s one of the worst things that can happen to investors who are reliant on the sustainability and, more importantly, consistency of dividend payments.
So, understandably, investors may ask themselves which companies can be relied upon to pay a dividend should another global pandemic-like situation hit us? It’s a fair question given what happened in 2020.
Even among REITs, stable payouts are not guaranteed. We’ve seen that with mall operators in Singapore, many of whom slashed their distributions to shareholders as shopper footfall slumped and businesses were forced to close.
However, here are two Singapore REITs that didn’t cut their dividends during the depths of Covid-19 last year and which could be relied on again in future for income investors.
1. Frasers Logistics and Commercial Trust
Frasers Logistics & Commercial Trust (SGX: BUOU), also known as FLCT, is a large-cap logistics and commercial REIT listed in Singapore.
It has a wide-ranging portfolio of 97 properties across Australia, Germany, Singapore, the Netherlands and the UK. As long-term investors, that diversification is crucial when identifying winning REITs.
More recently, the REIT was formerly known as Frasers Logistics Trust but combined with Frasers Commercial Trust to realise even bigger scale – which is a clear advantage for REITs in Singapore.
How did it fare during the pandemic in 2020? For dividend investors, it’s important to focus on the distribution per unit (DPU) because (at the end of the day) that’s what determines the payout amount for shareholders.
On this front, FLCT did well. For the first half of FY2020 (for the six months ending 31 March 2020), FLCT paid out a DPU of 3.47 Singapore cents.
In the second half of FY2020 (for the six months ending 30 September 2020), FLCT paid out an increased DPU of 3.65 Singapore cents.
While there’s the caveat that the distributions were split into uneven periods – due to a clean-up distribution following the completion of the merger between Frasers Logistics Trust and Frasers Commercial Trust – the overall DPU was up year-on-year as well.
For the full-year FY2019, FLCT paid out a DPU of 7.0 Singapore cents while in FY2020 this rose to 7.12 Singapore cents.
The REIT’s latest DPU of 3.8 Singapore cents for the first half of FY2021 also bodes well as this was up 9.5% year-on-year and also up 4% from the preceding half-year period.
For long-term investors, it’s clear that the scale and critical nature of FLCT’s properties means that shareholders were able to enjoy interrupted payouts during the worst periods of the Covid-19 pandemic last year.
2. Parkway Life REIT
Second on the list is Asia’s largest listed healthcare REIT; Parkway Life REIT (SGX: C2PU) It owns 53 properties across Singapore, Malaysia and Japan that are worth a combined S$2 billion.
Many of its Japanese properties are nursing homes, meaning it’s tapping into the rapidly-ageing population in Japan and the increased demand for old-age care in the country.
Meanwhile, in Singapore, Parkway Life is better known for the three hospitals it leases out to Parkway Holdings, a unit of IHH Healthcare; Mount Elizabeth Hospital, Gleneagles Hospital and Parkway Hospitals Singapore.
Earlier this month, Parkway Life REIT extended its master lease agreements for the three hospitals by a further 20 years to August 2042 and also has first right of refusal (ROFR) for Mount Elizabeth Novena Hospital.
In 2020, Parkway Life paid out a full-year DPU of 13.79 Singapore cents, which was up 4.7% year-on-year compared to 2019.
Parkway Life’s DPU in the first half of 2021 is 6.95 Singapore cents, which was a 4% year-on-year increased versus the first half of 2020.
The reliability of the dividend for Parkway Life REIT was unshaken throughout the pandemic and, in face, since listing in late 2007 it has never seen its full-year DPU decline year-on-year.
Dividends and reliability
For income investors looking for opportunities longer term, the pandemic fallout for many REITs is a good reminder to focus on the safety of the dividend as well and not just look at the yield.
With the above two Singapore-listed REITs, I’m confident that they will keep paying their current dividends, and will continue to increase them in the years to come.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Parkway Life REIT.
