Screening For Dividend Stocks In May 2019

I have recently added SPH Reit to my wife’s stock portfolio which has been on my watch list for quite some time. It is time to hunt for dividend yielding stocks to add to my watch list so that I can add them to either my or my wife’s stock portfolio when the opportunity arises.

One of the ways to hunt for dividend yielding stocks is to ran a stocks screener. I am currently using Stocks Cafe Stocks Screener as it allows me to save the conditions I have set to screen for dividend yielding stocks.

Here are the results ordered from the highest current dividend yield to the lowest.

Name Current Yield % P/E P/B Market Cap
Manulife Reit USD 8.736 15.7 1.047 1.1B
Haw Par 8.406 17.99 1.101 3.2B
Cromwell Reit EUR 8.367 10.36 0.956 1.1B
OUE Commercial Reit 6.891 10.02 0.701 1.4B
OUE Hospitality Trust 6.772 17.91 0.955 1.3B
Capita Retail China Trust 6.768 10.99 0.949 1.5B
Frasers Commercial Trust 6.531 9 0.938 1.3B
Far East Hospitality Trust 6.061 14.16 0.755 1.2B
Mapletree Industrial Trust 5.818 12.65 1.399 3.9B
CDL Hospitality Trust 5.752 17.58 1.05 1.9B
Oxley 5.688 5.82 0.937 1.3B
Ascendas-iTrust 5.682 6.56 1.471 1.3B
SingTel 5.521 16.68 1.785 51.6B
Suntec Reit 5.429 17.13 0.874 4.9B
DBS 5.409 12.34 1.472 70.6B
Hong Leong Finance 5.376 10.48 0.655 1.2B
SPH REIT 5.337 19.44 1.108 2.7B
Ascendas Reit 5.292 18.56 1.44 9.4B
Frasers Logistics and Industrial Trust AUD 5.116 12.58 1.327 2.5B
Mapletree NAC Trust 5.093 6.87 0.955 4.4B
Frasers Logistics and Industrial Trust 5.092 12.27 1.294 2.4B
SPH 5.081 14.97 1.151 4B
Frasers Centrepoint Trust 5.051 13.21 1.142 2.2B
Fortune Reit HKD 5.037 3.27 0.614 19.7B

Manulife Reit that appears in the top of the list looks interesting. Honestly, I have not done any research or read up on Manulife Reit yet but I do know a few financial bloggers holding the Reit. At 8.736% current dividend yield, this deem attractive to me but of course we all know that the higher the dividend yield, the higher the risk.

I do not know every stocks that appear in the above list but it serves as a good base to start researching deeper into them.

Please take note that the above is not a recommendation to buy or sell.

Happy hunting for dividend stocks!

My Personal Analysis of Keppel DC REIT

One REIT caught my attention recently. This is none other than Keppel DC REIT. While most REITs invest mainly in retail, industrial, commercial or hospitality, Keppel DC REIT is the first REIT that purely invests in data centres. Since it is the only data centre REIT, I decided to do some research and see if it is worth investing for long term dividends.

Now, what is a Data Centre? One slide from Keppel DC REIT’s Investor Presentation says it all. Basically, it is a building with facilities that house servers and network equipment, supporting clients’ critical business operations. The business requires technical expertise and intricate understanding of the industry and clients’ needs.

Portfolio

Keppel DC REIT’s portfolio comprises of 15 data centres across 8 countries namely Ireland, United Kingdom, The Netherlands, Germany, Italy, Malaysia, Singapore and Australia. Thus, 67.4% of portfolio are in Asia Pacific and 32.6% are in Europe. Below is the long list of the data centres:

Ireland

  • Keppel DC Dublin 1, Dublin
  • Keppel DC Dublin 2, Dublin

United Kingdom

  • GV7 Data Centre, London
  • Cardiff Data Centre, Cardiff

The Netherlands

  • Almere Data Centre, Almere

Germany

  • maincubes Data Centre, Offenbach am Main

Italy

  • Milan Data Centre, Milan

Malaysia

  • Basis Bay Data Centre, Cyberjaya

Singapore

  • Keppel DC Singapore 1
  • Keppel DC Singapore 2
  • Keppel DC Singapore 3
  • Keppel DC Singapore 5

Australia

  • iseek Data Centre, Brisbane
  • Gore Hill Data Centre, Sydney
  • Intellicentre 2 Data Centre, Sydney
  • Intellicentre 3 East Data Centre, Sydney (Construction expected to be completed in 2020.)

Occupancy

The portfolio occupancy stood at 93.1% as of 31 December 2018. As of 31 March 2019, the overall occupancy of Keppel DC REIT’s data centres stood at 93.2% with 65.5% of its leases expiring beyond the year 2024.

There are 3 lease types mainly Colocation, Fully-fitted and Shell & core. 75% of Keppel DC REIT’s lease type are colocation, 16.8% fully-fitted and 8.2% Shell & core.

Colocation means the equipment, space, and bandwidth are available for rental to retail customers. The customer pays for the rental of the equipment and uses its own servers. Colocation facilities provide diverse client profile and lease expiry.

Fully-fitted lease means Keppel DC REIT has equipped the building but the tenants have to manage the facility themselves and also pay for the maintenance expenses.

For the last lease type Shell & core, Keppel DC REIT simply provides the tenant with the building. The tenant have to uses its own servers, manage the facility themselves and cover all other expenses. Fully-fitted and shell & core facilities provide income stability with typically longer lease terms.

Financial Summary

Below is the 1Q2019 financial results. Gross Revenue and Net Property Income has jumped 26.4% and 26.8% respectively. Distribution Per Unit (DPU) had also increased by 6.7% if we compare the same quarter results.

1Q2019
(S$’000)
1Q2018
(S$’000)
Change
Gross Revenue 48,033 38,008 26.4%
Net Property Income 43,230 34,088 26.8%
Distribution Per Unit (“DPU”) (cents) 1.92 1.80 6.7%

Below is the FY18 full year financial results which looks quite solid to me. Based on the financial results, the REIT seems to be growing aggressively. Gross Revenue and Net Property Income jumped 26.2% and 26.0% respectively. Dividend investor can celebrate as the Distribution Per Unit (DPU) jumped 5.0%.

FY2018
(S$’000)
FY2017
(S$’000)
Change
Gross Revenue 175,535 139,050 26.2%
Net Property Income 157,673 125,119 26.0%
Distribution Per Unit (“DPU”) (cents) 7.32 6.97 5.0%

Debt

As of 31st March 2019, the average leverage stood at 32.5% with estimated $140.0m of undrawn credit facilities. The weighted average debt tenor is 3.3 years. 100% of its assets are unencumbered.

Management

Below is the REIT’s structure. As highlighted, the REIT manager can leverage the scale and resources of a larger management platform from Keppel Capital. The REIT manager can also leverage on Keppel Telecommunications & Transportation’s expertise and track record in the industry.

Current Valuation

As of 18th April 2019, the share price stood at S$1.49. Based on FY18 distribution per unit (DPU) of 7.32 cents, this translates to a dividend yield of 4.91%. Based on the net asset value of 1.05 cents, the current price is 41.9% to premium.

Personally, I felt that a good entry price may be S$1.35 whereby if we based on a DPU of 7.32 cents, this will translate to an acceptable dividend yield of 5.42%.

Pros

  • Demand for data centre space underpinned by increasing cloud adoption, rapid digital transformation, data centre outsourcing and data sovereignty regulations.
  • Global cloud infrastructure market is expected to grow by 25% CAGR in 2019-2023.
  • Global co-location market is expected to grow by 15-17% in 2019.
  • Keppel DC REIT has built-in rental escalations of 2% to 4% per year.
  • Clients whom have signed up for leases will rarely migrate to another different data centre as it takes a significant effort to perform a large scale data migration without affecting current operations, especially companies that operate 24×7.
  • Strong Sponsor Keppel T&T

Cons

  • Exposed to a potential issue of overcapacity in the market where supply exceeds demand especially during an IT downtrend.
  • The business model of Keppel DC REIT can be easily imitated by competitors in the similar industry.

Conclusion

At the current share price of S$1.49, it surely looks expensive to dive into this REIT right now given the current dividend yield of 4.91%. I will not recommend buying in Keppel DC REIT right now unless you have a strong justification.

If you are into the IT industry, you will know that the IT trend always changes every few years and it is sure difficult to keep up with the current computing trend. When trend changes such as cloud infrastructure, the data centres definitely have to fork out a lefty sum to refresh its equipment and facilities.

The risk for investing in Keppel DC REIT ranges from medium to high as one of the factors I consider is that competitors can easily imitate the business model. The dividend yield is not lucrative as I expect it to be as industrial rates yield at least 6% and above.

Nevertheless, this is one REIT I will keep in my watch list given that it is the only REIT that is pure data centre play.

Reviewing My Personal Analysis of SPH REIT

When I wrote about SPH Reit two years ago, SPH Reit only has two assets in its portfolio which are Paragon and The Clementi Mall. Back then, there was news that SPH Reit will add Seletar Mall to its portfolio but till date, it has not actualize. As of today, SPH Reit has include two new properties in its portfolio, which is The Rail Mall and Figtree Grove Shopping Centre.

The Rail Mall

SPH Reit acquired The Rail Mall on 28th June 2018 at S$63.2 million. Based on what I have gathered, 40% of the tenants are F&B restaurant operators, 20%are supermarkets and the rest consist of services providers such as spa and massage parlours and tuition centres.

The Rail Mall has 41.5% of its leases expiring in FY19. Read More