SPH Reit 2QFY20 DPU Dipped 78.7% Due to COVID-19

No, it is not an April Fool’s Day joke. On 1st April 2020, SPH REIT announced its 2QFY20 financial results. Even though gross revenue has increased by 26.1% due to the new contribution from Westfield Marion Shopping Centre, the distribution income fell 77% and distribution per unit (“DPU”) fell 78.9%. The DPU payout for 2QFY20 is 0.30 cents in anticipation of COVID-19 challenges.

The following explains the decline in DPU.

Following the emergence of COVID-19, SPH REIT announced a Tenants’ Assistance scheme on 27 February 2020 to assist tenants impacted by the outbreak. Subsequent to 2Q 2020, S$4.6 million of rental rebates for February and March were set aside and the February tranche of the rebate will be credited to tenants commencing from April 2020. The S$4.6 million has not been recognised in the 6 months period ended 29 February 2020.

2QFY20 Financial Results

2QFY20
(S$’000)
2QFY19
(S$’000)
Change
Gross Revenue 73,268 53,123 26.1%
Net Property Income 56,532 45,855 23.3%
Distributable Income 8,272 36,440 (77.3)%
Distribution Per Unit (“DPU”) (cents) 0.30 1.41 (78.7)%

Occupancy

Occupancy remains healthy at 98.9%.

  • Paragon (99.9%)
  • The Clementi Mall (100%)
  • The Rail Mall (92.2%)
  • Figtree Grove Shopping Centre (99.2%)
  • Westfield Marion Shopping Centre (98.4%)

Lease Expiry

The lease expiry for Paragon and The Clementi Mall is less worrying but I do see a higher lease expiry percentage for The Rail Mall, Figtree Grove and Westfield Marion Shopping Centre in FY20 which can impact the gross rental income.

The challenges for lease renewal can be the measures that are currently imposed due to COVID-19 such as the closure of restaurants, gyms, cafes and cinemas. Shopper traffic is also significantly reduced due to travel bans and restrictions to stay at home.

Dividend Yield

Besides this quarter, I am expecting future dividends over the next few quarters or even next financial year to be cut as well (depending on how long the COVID-19 situation will drag).1.38 cents was already paid out in 1QFY20. So if we based on the modest distribution of 0.30 cents in the next two quarters, I estimate the total distribution to be 2.28 cents.

Thus, based on the current share price of S$0.71 and a total DPU of 2.28 cents for FY20, the estimated dividend yield is 3.21%. Will the share price dipped further? I am not sure as no one has a crystal ball.

Is it a good time to enter into SPH REIT now? The REIT is at its historical high yield (7.89%) and my thought is that we should buy in small tranches should you want to buy into SPH Reit right now. If the share price fall lower, then deploy a second tranche.

The dividend yield will recover when the market recovers.

REITs Limited Time Offer!

The Federal Reserve announced that it will cut interest rates to zero as part of its emergency measure to protect the economy from the impact caused by the COVID-19 virus. I thought that this will give the stock market a boost but it didn’t. The stock market plunged further and this makes REITs certainly a lot cheaper at ridiculous prices I have never seen before.

Below are the stocks that I currently held in my stock portfolio. With the dip in stock prices, the current dividend yield had increased which makes certain REITs very attractive. Do expect further downside and do not expect recovery that soon. For long term dividend investors, this should not be much of an issue.

I will probably wait for the stock market to hold steady at current levels before deploying more tranches of my cash.

Stock Name Total Dividends Paid (Cents) (FY19) Closing Price (18th March 2020) Current Dividend Yield (%)
OUE Commercial REIT 3.31 S$0.32 10.34%
Frasers Commercial Trust 9.60 S$1.12 8.57%
Frasers Logistics and Industrial Trust 7.00 S$0.82 8.54%
SPH REIT 5.60 S$0.74 7.57%
ComfortDelgro 9.79 S$1.55 6.32%
CapitaMall Trust 11.97 S$1.83 6.54%
Mapletree Commercial Trust 9.14 S$1.77 5.16%
Parkway Life REIT 13.19 S$2.81 4.69%
ST Engineering 15 S$3.30 4.55%

Screening For Dividend Stocks In March 2020

The stock market crashed this week on further news of the spread of the COVID-19 virus and also the oil price war between Saudi Arabia and Russia. Due to the continued bad news, the Straits Times Index (STI) fell as much as 6.03% on Monday, 9th March 2020. As you can see from the chart below, the Straits Times Index (STI) crashed further on Friday, 13th Mar 2020 before rebounding slightly at the end of the day.

During such crisis, there is an opportunity to start picking up quality stocks that can climb back and continue its growth when the stock market normalize in 1 or 2 years time (I guess).

If you had followed my blog, you know that I always have my stock screener ready to identify stocks that gives me a good dividend yield. When stock price goes down, the current dividend yield goes up.

The stock screener offered by Stocks Café allows me to save the conditions that I can pre-set. You can check out my review here on the Stocks Café Dividend Stocks Screener (Read more: Screening For Dividend Stocks Using Stocks Cafe Stock Screener).

Below are the top dividend yielding stocks as of 14th March 2020.

Name Current Yield % P/E P/B Market Cap
Cromwell REIT SGD 9.494 9.32 0.848 1.7B
Mapletree NAC Trust 8.651 5.11 0.703 3.2B
OUE Commercial REIT 8.487 13.73 0.633 2.1B
Ascendas-iTrust 8.361 5.47 1.121 1.4B
CapitaRetail China Trust 8.25 7.75 0.774 1.5B
CDL Hospitality Trust 8.054 12.04 0.735 1.4B
Starhill Global REIT 7.757 19.36 0.651 1.3B
Far East Hospitality Trust 7.189 16.77 0.613 1B
Frasers Commercial Trust 6.809 8.58 0.861 1.3B
Yanlord Land 6.733 2.97 0.358 2B
Frasers Logistics & Industrial Trust 6.667 10.27 1.106 2.4B
Ascendas REIT 6.524 19.1 1.392 10.9B
UOB 6.455 7.73 0.848 33.4B
SPH 6.383 15.02 0.88 3B
DBS 6.357 7.74 1.009 49.2B
Yangzijiang Shipbuilding SGD 6.289 5.1 0.519 3.1B
Suntec REIT 6.255 10.85 0.712 4.3B
Hong Leong Finance 6.25 10.4 0.561 1.1B
SPH REIT 6.164 14.57 0.97 2.5B
TCIL HK$ 6.117 10.78 0.34 3.8B
OCBC Bank 5.843 8.02 0.874 39.9B
ComfortDelgro 5.725 13.97 1.427 3.7B
SIA Engineering 5.556 11.61 1.435 2.2B
CapitaMall Trust 5.491 11.53 1.035 8B
Jardine Cycle & Carriage 5.409 7.45 0.971 9B
Bukit Sembawang 5.379 13.45 0.791 1.1B
Olam International 5.298 9.45 0.893 4.8B
SATS 5.278 17.89 2.487 4B
Genting Singapore 5.147 11.91 1.018 8.2B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.