5 Reasons Why Ascendas REIT Is A Top Tier REIT

Ascendas REIT is one of Singapore's most popular blue-chip dividend stock among investors and it is for a good reason. Ascendas REIT is Singapore's first and largest industrial REITs and has a reputation of being one of Singapore's top tier REITs in terms of stable dividends and share appreciation. It played an important role in the development of the Singapore REIT's scene by providing an attractive opportunity for investors to invest in business parks and industrial properties in Singapore. Ascendas REIT has a market capitalization of $12 billion and a diversified portfolio consisting of 198 industrial properties across the United Kingdom, United States, Singapore, and Australia worth $12.8 billion. Here are 5 reasons why Asceandas REIT is a top tier REIT. 

Proven Consistent Dividend History

Ascendas REIT has an impressive 18-year consistent dividend payout history, making it one of the few REITs in Singapore with a consistent dividend track record of more than 15 years. This means that they have been paying out dividends to shareholders for 18 years continuously without fail or defaulting on their payments. Their long consistent dividend history reflects the management's proficiency in terms of capital management and the ability to maintain a healthy balance sheet with sustainable dividends. This is one of the traits of a top tier REIT or blue-chip dividend stock as investors can be extremely confident that they will continue to receive dividends despite potential changes in the economy (such as the current COVID-19 pandemic). The last thing you would want as a dividend investor is for the company to stop paying out dividends as it signals that there is something fundamentally wrong with the management of the company.  


Strong Sponsor

Ascendas REIT is sponsored by CapitaLand Limited. CapitaLand Limited is one of Asia's leading diversified real estate group with a large property portfolio worth $134 billion. A sponsor helps to generate the initial properties for the REIT's portfolio and can continue to provide profitable properties to the REIT in the future. Furthermore, a strong sponsor can boost investors' confidence in the REIT as it can provide financial support to the REIT in challenging economic times. CapitaLand Limited provides a strong financial backbone that Ascendas REIT can rely on in times of difficulties. The strong sponsor in CapitaLand Limited reduces the risks associated with Ascendas REIT and provides strong stability. 


Well-Diversified Tenant Portfolio and High Occupancy Rate

Ascendas REIT has one of the most diversified tenant portfolios consisting of impressive 1,460 tenants. Their top 10 tenants only contribute 17.4% of their portfolio monthly gross revenue as of June 2020. This is extremely good as Ascendas REIT is not overly reliant on only a few tenants for the majority of its income. This reduces the risk of a few large tenants not paying their rent and thus significantly affecting Ascendas REIT's income. Moreover, Ascendas REIT tenants are operating in more than 20 industries. This well-diversified tenant portfolio is one of the reasons Ascendas REIT can continue to outperform other REITs during this COVID-19 pandemic. Ascendas REIT has a high occupancy rate of 91.5% as of June 2020. They are maximizing the use of their properties to generate as much income as possible.  Ascendas REIT's remarkable diversified tenant portfolio and high occupancy rate contribute to its status as a top tier blue-chip dividend REIT. 






Appropriate Debt Gearing Ratio

Ascendas REIT has an appropriate debt gearing ratio of 36.1% as of 30 June 2020 (<40%). REITs often use debt as leverage to acquire more properties to expand their portfolio at a faster rate. Ascendas REIT has a well-spread debt maturity profile with the longest debt maturing in FY2029. Furthermore, they were able to maintain a high level of natural hedge to minimize the effects of adverse exchange rate fluctuations. Ascendas REIT's management has always been able to maintain a strong healthy balance sheet and exercise efficient capital management. This reassures investors that Ascendas REIT is unlikely to face a situation where it is unable to pay off its debt and experience cash flow problems. This is definitely one of the reasons Ascendas REIT is a top tier REIT. 


Dividend Yield

Ascendas REIT's average dividend yield for the past 5 years is 4.7% which is well within the average Singapore REIT's dividend yield of 4-6%. Ascendas REIT total income available for distribution for H1 FY2020 rose 3.7% compared to H1 2019 to $263.2 million. However, distribution per unit decreased by 10.8% from 8.153 cents to 7.270 cents due to the higher applicable number of units arising from the Rights Issue in December 2019. Ascendas REIT has a relatively stable dividend yield given that its share price has appreciated by 52% in 5 years from $2.19 to $3.30. Ascendas REIT is considered a top tier REIT as it combines both potential share appreciation and a stable dividend yield in a single high-quality REIT.


Verdict

Ascendas REIT is definitely one of Singapore's top tier REIT given its impressive track record over the years. I would encourage any dividend investors to seriously consider adding this outstanding REIT into your portfolio in the long run. It can provide both share appreciation and a stable dividend yield in one top-notch REIT. 

Source: Ascendas REIT H1 FY2020 Results

What other top tier REITs do you recommend?


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