Almost two years and six initial public offerings later, real estate investment trusts (REITs) have proven to be a less volatile investment vehicle and a regular source of dividend income even during a pandemic.
Five REITs listed at the Philippine Stock Exchange paid out a total of P5.77 billion in cash dividends last year, resulting in 2.16 percent dividend yield, even as three of the five REITs were only listed for an average of four months as of the end of 2021.
Today, there are already six listed REITS: AREIT, Inc., DDMP REIT, Inc. (DDMPR), Filinvest REIT Corp. (FILRT), RL Commercial REIT, Inc. (RCR), MREIT, Inc., and Citicore Energy REIT Corporation (CREIT). One more, Vista REIT, is in the pipeline.
Of these REITs, almost all hold an office or commercial leasing portfolio while it is only CREIT is a renewable energy-focused company holding a portfolio of solar farms.
COL Financial said the first two REITs to go public have so far provided the highest growth in dividend yield while the others have just begun to declare cash bonuses. AREIT has chalked up a 15.82 percent growth in dividend per share followed by DDMPT with 15.52 percent.
“REITs have become a preferred asset class among investors because of its dividend mandate. With more REITs expected to list this year, including non-property REITs, investors will have a wider selection of companies that can provide passive income,” PSE President Ramon S. Monzon explained.
A REIT is a stock corporation put up to own income-generating real estate assets with regular earnings from rent and usage fees such as apartment or office buildings, medical facilities, hotels and resorts, highways, warehouses, shopping centers, railroads, among others.
For property companies, transferring these assets into a REIT allows them to raise fresh and cheaper funds that can be used to finance acquisitions, development and expansion projects without losing majority control over these assets.
In a way, by offering REIT shares, they are converting future earnings into instant cash since the stock market usually prices shares about 15 times their annual earnings.
For investors, a REIT is a type of investment instrument that provides a return derived from rental income of the underlying real estate asset distributed through dividends, making them comparable to securities such as bonds with the added bonus of the possibility of share price appreciation.
The purchase of shares of stock of REITs allows investors, especially small or retail investors, to participate in the ownership of a portfolio of different properties, locations and property types at a fraction of their cost.
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The article was originally published in Manila Bulletin and written by James A. Loyola.
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