How I Evaluate S-REITs: Are They a Buy Right Now?
Ah yes, Real Estate Investment Trusts (REITs), an asset class the Singapore stock market is very well known for. There is no denying that Real Estate, whether you like it or not, will remain an integral part of Singapore's economy. For those unaware, REITs are companies that own and operate a portfolio of real estate buildings, redistributing a minimum of 90% of taxable income back to shareholders in the form of dividends . In Singapore, REITs typically make use of leverage to beef up their portfolios. Hence, the Monetary Authority of Singapore (MAS) mandates that REITs adhere strictly to a gearing ratio of below 50%. That is to say, REITs should not borrow more than 50% of their net asset value, which will be incredibly pertinent for reasons I will get into later on. Additionally, REITs are typically held for dividend income, as opposed to price appreciation, since their high payout ratio leaves little room for reinvestment. I know I repeat this ad nauseam, but ...