By MoneyBees
Work out a REIT's distribution yield from DPU and unit price, your yearly payout, yield on cost and the price for a target yield, with MAS's 50% gearing limit and 1.5x interest cover floor.
Divide the distribution per unit for a year by the unit price. A REIT paying 5 cents a year at S$1.00 a unit yields 5%. If it pays half-yearly or quarterly, add up the payouts for the year first.
The yearly distribution divided by the price you paid, not today's price. It tells you what your own money is earning.
Individuals pay no tax on distributions from Singapore REITs, unless they receive them through a partnership in Singapore or from a trade, business or profession.
Qualifying foreign non-individuals have 10% withheld as a final tax on REIT distributions, a rate that runs to 31 Dec 2030. Individuals, local or foreign, are exempt.
Since 28 Nov 2024, gearing (aggregate leverage) must not exceed 50% of the REIT's deposited property, and the REIT must keep an interest coverage ratio of at least 1.5 times.
From 1 Jan 2022 to 27 Nov 2024, REITs could borrow up to 45%, or up to 50% only with an interest coverage ratio of at least 2.5 times. MAS replaced it with the single 50% limit.
MAS expects the manager to take steps to improve it and disclose its plans. Below 1.5 times the REIT is under the MAS minimum.
Yield rises when the unit price falls, which can reflect expected cuts to distributions. Look at the distribution history, gearing and interest cover as well.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).