Singapore REITs To Buy in November 2023

Best REITs to Buy in March 2024

Best REITs to Buy in March 2024

Below are the Best REITs to Buy in March 2024. Just one day ago, there are news that US Federal Reserve (Fed) are unlikely to cut interest rates before June 2024. As a result of this negative news, stocks tumbled.

The inflation rate is an important economic indicator that reflects changes in the general price level of goods and services. Inflation rate can impact purchasing power, interest rates, and investment decisions. The Federal Reserve (Fed) monitors inflation trends when making monetary policy decisions such as rising or cutting interest rates.

As you can see from the chart below, the annual inflation rate in the United States fell back to 3.1% in January 2024, following a brief increase to 3.4% in December. This rate came in higher than forecasts of 2.9% which explains why the Fed preferred to hold back their interest rates cuts.

US Inflation Rate January 2024

While short term investors lament at the fall of stock prices, longer term investors see this as an opportunity to further scoop up quality dividend yielding stocks such as Singapore REITs.

I use Stocks Café Stock Screener to screen for a list of REITs that meet my predefined criteria so that I have a shorter list of REITs to analyse.

Below are the criteria that I used to screen for dividend stocks. You can adjust them to fit your risk appetite.

  • Current Yield (%) >= 5 and <= 10
  • Price / Earnings <=20
  • Price / Book <= 3
  • Market Capitalization >= 1B

It is important for you to know that you should not buy the stock solely based on the current dividend yield. The screening results only provide you a shorter list to analyse further.

With the shorter list of REITs, I will then drill in further into each of them to analyse if they are worthy to add into my stock portfolio.

Best REITs to Buy in March 2024 (Price / Earnings <=20)

AIMS APAC Reit (SGX:O5RU)
Current Dividend Yield: 7.72%
Price to Equity: 13.896
Price to Book: 0.69
Market Capitalization: SGD 1B

Lendlease Reit (SGX:JYEU)
Current Dividend Yield: 7.61%
Price to Equity: 18.645
Price to Book: 0.607
Market Capitalization: SGD 1.4B

Frasers Centrepoint Trust (SGX:J69U)
Current Dividend Yield: 7.56%
Price to Equity: 17.491
Price to Book: 0.933
Market Capitalization: SGD 4B

Mapletree Pan Asia Commercial Trust (SGX:N2IU)
Current Dividend Yield: 6.72%
Price to Equity: 19.56
Price to Book: 0.743
Market Capitalization: SGD 7.2B

Mapletree Logistics Trust (SGX:M44U)
Current Dividend Yield: 6.21%
Price to Equity: 13.684
Price to Book: 0.965
Market Capitalization: SGD 7.3B

PARAGON REIT (SGX:SK6U)
Current Dividend Yield: 6.12%
Price to Equity: 17.083
Price to Book: 0.807
Market Capitalization: SGD 2.3B

Best REITs to Buy in March 2024 (Price / Earnings > 20)

You may be wondering why the above list is so short. I investigated and found that the Price to Equity ratio for many REITs have failed my criteria of < 20. The PE of these REITs have increased significantly.

If I ask Co-Pilot why the P/E ratio for REITs increased suddenly, below is the response.

The price-to-earnings (P/E) ratio for Real Estate Investment Trusts (REITs) can sometimes appear unusually high due to specific factors related to their financial statements. Let’s explore why this happens:

  1. Depreciation Impact:
    • REITs own and manage real estate properties, which they lease out to tenants. One significant non-cash expense on their income statements is depreciation.
    • Depreciation represents the gradual reduction in the value of physical assets (such as buildings) over time. It is an accounting measure that allocates the cost of an asset over its useful life.
    • Since REITs own substantial real estate portfolios, their depreciation charges can be substantial. This non-cash expense reduces reported earnings, affecting the P/E ratio.
  2. Earnings Calculation:
    • The P/E ratio is calculated by dividing the stock price by the earnings per share (EPS).
    • For REITs, the earnings calculation includes depreciation as an expense. However, depreciation does not directly impact cash flow or the ability to pay dividends.
    • As a result, the P/E ratio may appear inflated because it considers both cash and non-cash expenses.
  3. High Dividend Payouts:
    • REITs are required to distribute a significant portion of their earnings as dividends to maintain their tax-advantaged status.
    • Despite high depreciation charges, REITs often have attractive dividend yields compared to other investment options.
    • Investors seeking income may be willing to accept a higher P/E ratio if the dividend yield remains attractive.
  4. Market Sentiment and Demand:
    • Investor sentiment and demand play a role in determining stock prices and, consequently, P/E ratios.
    • When investors perceive REITs as stable income-generating assets, they may bid up prices, leading to higher P/E ratios.
    • Conversely, during periods of uncertainty or rising interest rates, REITs may face selling pressure, impacting their P/E ratios.
  5. Sector-Specific Challenges:
    • Different REIT sectors (e.g., office, retail, industrial, residential) face unique challenges.
    • For example, office REITs may experience tenant shrinkage due to remote work trends, while retail REITs compete with e-commerce.
    • These sector-specific challenges can affect earnings and, consequently, the P/E ratio.

In summary, the seemingly high P/E ratios of REITs are influenced by their accounting treatment of depreciation, dividend payouts, market sentiment, and sector-specific dynamics. Investors should consider these factors when evaluating REITs and not rely solely on P/E ratios for investment decisions.

I removed the P/E criteria and run my stock screener again. Below are the REITs whereby their Price to Equity ratios are greater than 20.

CapitaLand China Trust (SGX:AU8U)
Current Dividend Yield: 9.11%
Price to Equity: 37.656
Price to Book: 0.534
Market Capitalization: SGD 1.2B

OUE REIT (SGX:TS0U)
Current Dividend Yield: 7.89%
Price to Equity: 33.203
Price to Book: 0.451
Market Capitalization: SGD 1.5B

Starhill Global Reit (SGX:P40U)
Current Dividend Yield: 7.83%
Price to Equity: 40.92
Price to Book: 0.627
Market Capitalization: SGD 1.1B

CapitaLand Ascott Trust (SGX:HMN)
Current Dividend Yield: 7.35%
Price to Equity: 52
Price to Book: 0.71
Market Capitalization: SGD 3.4B

DigiCore Reit USD (SGX:DCRU)
Current Dividend Yield: 7.03%
Price to Equity: 73.366
Price to Book: 0.713
Market Capitalization: SGD 1.1B

ESR-LOGOS REIT (SGX:J91U)
Current Dividend Yield: 6.94%
Price to Equity: 29.593
Price to Book: 0.811
Market Capitalization: SGD 2.4B

Far East Hospitality Trust (SGX:Q5T)
Current Dividend Yield: 6.82%
Price to Equity: 27.479
Price to Book: 0.662
Market Capitalization: SGD 1.2B

Keppel Reit (SGX:K71U)
Current Dividend Yield: 6.71%
Price to Equity: 51.783
Price to Book: 0.61
Market Capitalization: SGD 3.3B

NetLink NBN Trust (SGX:CJLU)
Current Dividend Yield: 6.27%
Price to Equity: 30.429
Price to Book: 1.267
Market Capitalization: SGD 3.3B

Suntec Reit (SGX:T82U)
Current Dividend Yield: 6.26%
Price to Equity: 50.537
Price to Book: 0.509
Market Capitalization: SGD 3.3B

CapitaLand India Trust (SGX:CY6U)
Current Dividend Yield: 6.20%
Price to Equity: 49.282
Price to Book: 0.969
Market Capitalization: SGD 1.4B

CDL Hospitality Trust (SGX:J85)
Current Dividend Yield: 5.97%
Price to Equity: 153.676
Price to Book: 0.676
Market Capitalization: SGD 1.2B

Mapletree Industrial Trust (SGX:ME8U)
Current Dividend Yield: 5.93%
Price to Equity: 23.591
Price to Book: 1.157
Market Capitalization: SGD 6.7B

CapitaLand Integrated Commercial Trust (SGX:C38U)
Current Dividend Yield: 5.63%
Price to Equity: 32.757
Price to Book: 0.9
Market Capitalization: SGD 13B

CapitaLand Ascendas REIT (SGX:A17U)
Current Dividend Yield: 5.57%
Price to Equity: 70.514
Price to Book: 1.169
Market Capitalization: SGD 12B

Keppel Data Centre Reit (SGX:AJBU)
Current Dividend Yield: 5.55%
Price to Equity: 31.843
Price to Book: 1.213
Market Capitalization: SGD 2.9B

 

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