4 Reasons To Diversify Your Portfolio With REITs

Whether you’re an investor eager for high yields or one seeking long-term capital appreciation, here are four reasons to add S-REITs to your investment portfolio.

S-REITs have provided investors with long term sustainable total returns. The FTSE Straits Times REIT Index delivered 5-year total returns of 38% from 2013 to 2018. In 2019, it was up close to 20%, almost double the 9.4% in total returns generated by the benchmark Straits Times Index (STI). In an environment of heightened market volatility, the outperformance of S-REITs certainly points to its resilience.

The outlook for S-REITs continues to be positive. Amid a lower-for-longer interest rate environment, S-REITs have been on an acquisition trend. Ascendas REIT recently acquired 30 business parks for S$1.66 billion, a move that will see it diversify into the US from its current markets of Singapore, Australia and the UK. In September 2019, three other S-REITs announced acquisition plans as well. These acquisitions are likely to be yield accretive, and offer potential for greater dividend growth.

Meanwhile, REITs in the logistics sector are seeing a multi-year structural growth in demand as well. Strong e-commerce growth for instance have bode well for logistics REITs, given the increased demand for warehousing space.

Similar to stocks, REITs are listed on the Singapore Exchange and you can invest in them the same way you would in a stock. Before investing in a S-REIT, look at factors beyond just dividend yield. Consider the REIT’s potential growth, and whether the dividend paid out is likely to rise. Think about the quality of the assets within the REIT’s portfolio, the tenant mix and evaluate the track record of the REIT manager.

While S-REITs are not completely immune to global market volatility, they still make good, defensive investments, given the predictability of their lease-based income and regular dividend payouts. In short, this is an asset class that warrants a place in any portfolio.

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