REITs investing

by dvdmovie1

Personally, I like REITs not from the standpoint purely of income, but to look for things that I believe are compelling “growth and income” stories, such as the cell tower REITs and logistics REITs (which I think benefit significantly from e-commerce.) For a while, I had significant investments in data center REITs. So, I don’t look at REITs as something that I have to allocate to but something where I may have a lot or may have none. Occasionally, there’s values in REITs – Vornado has repeatedly made the case that the company is undervalued (VNO), but I don’t have the desire to really add much more of anything at this point and Vornado is – at this point – pretty much a NYC REIT and that concentration brings added risk (despite NYC, there are a lot of concerns right now with NYC retail.)

“so yeah I would probably not be receiving dividend for that 2-3 years of recession”

In terms of REITs purely for dividend income, I’d look for names that demonstrated ability to maintain the dividend during recession because ultimately if you are reinvesting those dividends (I’m not sure if you have automatic dividend reinvestment in Singapore, I’m guessing you do) you want to be able to do that when prices are low. If you’re investing in income names where there was a proven inability to maintain the dividend during the downturn and your goal is dividend income, then why not invest in healthcare dividend names or names like the US dividend aristocrats (names that have raised the dividend every year for 25+ years.) Names where you can reasonably comfortably (no guarantees, but less of a risk of a dividend cut) expect the dividends to continue through a downturn and the share price may not get obliterated in the same manner riskier REITs likely will.

I like REITs quite a bit, but I have to attachment to the sector, really; either there’s names where I like the story or not. In terms of consistent/stable long-term income, I think there’s better sectors (although there are some high quality REITs that have maintained dividends through downturns.) If you aren’t taxed on REIT dividends in Singapore that is a positive that US investors do not have that is in favor of the sector, but I still think it takes homework in terms of determining dividend sustainability and whether or not the company is in a compelling real estate sub-sector. I’d rather a high quality, consistent/sustainable 2-3% yield than a 4-6% with higher risk and a yield that is potentially unusustainable in a downturn.

“and that the eventual price of REITs might not be that major of a concern (?)”

Price IMO is always a concern. It’s part of the reason why I don’t understand this sub’s obsession with Ford, whose performance has been mediocre for a while now and who cut the dividend entirely for 5 years. So you have a dividend that is likely not going to be maintained in a downturn and reinvesting in a company whose share price has been disappointing (to put it lightly) for years now. I’d rather a growing and fundamentally strong 1-2% yielding name whose dividend will likely continue to grow over time. IMO sometimes it feels like people are investing in a dividend yield rather than a company; dividends are nice but company fundamentals should always be the first priority. If I think a company is mediocre, I couldn’t care less if it offers a high yield.

That said, going alllll the way back to Singapore REITs, I’m not familiar with the entire group, but HK Land is something to perhaps investigate. That will be volatile in a downturn and may need to cut the dividend, but you have a very strong parent company in Jardine Matheson and both HK Land and Jardines have been around since the late 1800’s.

Additionally, compelling real estate plays aren’t always REITs. I don’t own it but look at MTR Corporation in Hong Kong.

“The Unique Genius of Hong Kong’s Public Transportation System The use of a clever financing system has enabled the territory to provide world-class service—without breaking the bank.”

“Like no other system in the world, the MTR understands the monetary value of urban density—in other words, what economists call “agglomeration.” Hong Kong is one of the world’s densest cities, and businesses depend on the metro to ferry customers from one side of the territory to another. As a result, the MTR strikes a bargain with shop owners: In exchange for transporting customers, the transit agency receives a cut of the mall’s profit, signs a co-ownership agreement, or accepts a percentage of property development fees. In many cases, the MTR owns the entire mall itself. The Hong Kong metro essentially functions as part of a vertically integrated business that, through a “rail plus property” model, controls both the means of transit and the places passengers visit upon departure. Two of the tallest skyscrapers in Hong Kong are MTR properties, as are many of the offices, malls, and residences next to every transit station (some of which even have direct underground connections to the train). Not to mention, all of the retail within subway stations, which themselves double as large shopping complexes, is leased from MTR. ”


Disclaimer: Consult your financial professional before making any investment decision.


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