Ascendas REIT took a beating from COVID-19. But with fundamentals remaining healthy, it is well positioned to benefit from the eventual return of workers to the office. Here’s what you need to know before you invest.
Ascendas Real Estate Investment Trust (Ascendas REIT) is Singapore’s first and largest listed business space and industrial real estate investment trust – and no doubt one of the early securities that helped popularise REITS as an investment asset.
It was listed on the Singapore Exchange Securities (SGX) almost two decades ago, in November 2002, and to date has a whopping S$15.9 billion in investment properties under management.
The portfolio is diversified both geographically and across sectors – being spread across over 200 commercial, business and industrial properties in Singapore, Australia, the US, UK and Europe – and covering business spaces, logistics and distribution centres, industrial properties and data centres.
Some of the largest and most successful companies around the world – think Singtel, Stripe, DSO National Laboratories, SEA Group, Pinterest, DBS, CareFusion, Equinix, Wesfarmers and Citibank – are tenants at Ascendas REIT properties, which no doubt helps the security maintain a degree of attractiveness for investors looking for a steady source of dividend returns.
But with the COVID-19 pandemic wreaking untold economic havoc across the world, how is Ascendas REIT being impacted, and how will it likely respond? More importantly, is now the right time to add this blue-chip stock to your portfolio?
To help you find out, this article will cover:
- Ascendas REIT share prices in the past five years
- How much dividends will I receive?
- Ascendas REIT dividends payout schedule
- What risks do I face?
- What does the future hold for Ascendas REIT?
Ascendas REIT share prices in the past five years
|Ascendas REIT (A17U)||Share price|
|Oct 2 2017||S$2.67|
|Oct 4 2021||S$2.97|
A modest 11% gain over five years may not seem very exciting. However, to uncover the truth, we have to look a little bit deeper.
What this set of numbers does not show is a strong uptrend, interrupted by a dramatic drop, and then an even more exhilarating rally to all-time-highs, before a pullback to the share prices we’re currently seeing.
And the truly interesting part is the timing of these occurrences. A17U went from S$3.30 per share to as low as S$2.60 in March 2020 (presumably after the release of first-quarter results), triggered by none other than the COVID-19 pandemic. This makes sense, considering the share’s underlying holdings in the hospitality and retail sector.
However, in a mind-boggling turn of events, the stock then started a rally, skyrocketing to its highest point of S$3.50 on August 3 2020.
But, the mania soon cooled off, bringing prices down to around S$2.90 per share, where it remains at the point of writing this article.
While we don’t quite know the reason for the rally in August (perhaps it was a matter of national pride, on account of our nation’s approaching birthday?), we made an important observation: the crash in March 2020 was met with a spike in trade volume.
This indicates that in the eyes of investors, Ascendas REIT is a solid stock to hold, even in the face of a global pandemic that has crippled the world.
How much dividends will I receive?
|Gross dividends (cents per share)||9.3||16.5||16.1||15.8||16|
Generally speaking, REITs are known for paying high dividends to investors, and investors who are familiar with the space will know that Ascendas REIT isn’t among the top performers in this regard.
Even still, from 2017 to 2020, shareholders consistently received around 16 cents per security, equal to an average annual yield of around 5.4%.
But in 2021, the dividends paid out was markedly lower at 9.3 cents, representing a yield of just 3.15%. Whether this trend will correct itself remains to be seen.
Ascendas REIT dividends payout schedule
|Dividends pay date(s)||3 pay dates||3 pay dates||3 pay dates||3 pay dates||3 pay dates|
One unique feature about Ascendas REIT is the multiple dividend payouts that shareholders will receive throughout the year. In any 12-month financial accounting period, you could expect to receive as many as nine dividend payouts.
However, these payouts tend to be grouped into three pay dates per year, such that you’ll receive two or three dividend payouts each time.
Judging by the payouts announced in the last five years, there is no fixed schedule, although the pay dates themselves do seem to be fairly well spread out throughout the year.
What risks do I face?
Simply going off the price chart showing the share prices from 2017 to the present, we see that Ascendas REIT shows some promise. It is trading at a slight profit of 11%, compared to five years ago.
In fact, as pointed out earlier, the (somewhat irrational) exuberance displayed by the market after the price crash of March 2020 indicates that A17U holds a favoured position in the estimation of many investors.
While the share prices have been crabbing sideways ever since the correction after the August 2020 spike, that’s not entirely unexpected, considering how efforts to safely reopen the country has been largely a start-stop affair so far.
One risk that cannot be ignored is the changing attitudes towards telecommuting as a result of the prolonged pandemic. Office, industrial and commercial space may continue to see depressed demand, if work-from-home continues to be the default arrangement for the masses. This could have a chilling effect on the rental income of the properties managed under the REIT.
This risk is somewhat diluted for Ascendas REIT, given its diversified exposure to a wide range of sectors, some of which – such as logistics, data centres, manufacturing, office backroom support, etc – are expected to see continued demand.
Perhaps this sentiment, shored up by Ascendas REIT’s strong balance sheets in recent years (especially 2020), is the reason for the security’s promising consensus rating – a strong Outperform – on the SGX.
What does the future hold for Ascendas REIT?
Given the ongoing murkiness around how fast things will go back to ‘normal’, and to what degree, the future remains fuzzy for Ascendas REIT.
However, as the main strengths of a REIT lies in its dividend-producing capabilities, an increase in share price isn’t quite as important, as long as the dividend yield rate continues to be maintained.
If A17U manages to do so, it is well positioned to benefit from the return of workers to the office – a prospect that increases in certainty as breakthroughs are made day-by-day in our fight against COVID-19.
Read these next:
Guide To Real Estate Investment Trusts (REITs), And Whether You’re Ready For It
Guide To Property Investment In Singapore
7 Popular Types Of Investment In Singapore (And Tips To Use Them For Optimal Gains)
CapitaLand Dividends & Share Price Guide: Is It Worth Buying?
8 Ways To Accelerate Your Wealth In Singapore
By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.