INFLATIONARY pressures and escalating retail rents seem to have benefited retail focused real estate investment trusts (Reits) and business trusts over recent months.
Six Singapore-listed Reits which have been categorised to have a retail focus by Bloomberg - namely Lippo Mapletree Indonesia Retail, CapitaRetail China Trust, Starhill Global Reit, Frasers Centrepoint, Fortune Reit and CapitaMall Trust - yielded an average price return of around 13 per cent since the onset of 2012, which is almost on par with the year-to-date return of the Straits Times Index (STI), even before factoring in their compelling distribution returns.
Notably, Reits tend to offer dividend yields superior to that of other equity peers due to the sector's distribution of at least 90 per cent of their cash flow income to unit-holders in return for tax concessions from the government.
For instance, distribution yields for the six Reits averaged an attractive 6.1 per cent, and ranged from 5.2 per cent for CapitaMall Trust and Fraser Centrepoint to 6.6 per cent for CapitaRetail China Trust, Starhill Global Reit and Lippo MapleTree Indonesia Retail, according to data from Bloomberg.
Their above-average yields have also made these counters increasingly popular with investors over the past few years, resulting in stronger price support for the sector's stocks in general.
To illustrate, volatility - which measures the percentage price swings in the market - for the six Reits during the 90 days to May 2, averaged 18.1 per cent, as compared with 23.1 per cent for the 30 STI constituents over the same period (and the percentages are not reflective of index volatility as each stock was not weighted according to its size).