Late last year, you might have seen our article on the 3 Important Rules for Dividend Stocks,
where we pointed out the 3 things you should be looking at if you would like to invest in dividend stocks.
Those 3 things were:
- Free Cash Flow
- Dividend Pay-out History
- Dividend Yield
While these criteria are applicable to most dividend-issuing companies around the world, investors in Singapore have been blessed for years now with a much more stable way to gain dividends…
… by investing in REITs.
Simply put, REITs (Real Estate Investment Trust) are business trusts
which allow investors to own a chunk of a commercial property in the form of shares in the stock market.
And while investors around the world generally invest in REITs to diversify their portfolio or to ride on the stable property market in their countries,
Singapore REITs (or S-REITs) investors are usually in it for their consistent dividends.
You see, most people…
even investors, do not know this but
S-REITs are generally encouraged to distribute 90% of their rental income as dividends to their unitholders so to enjoy tax transparency treatment by IRAS.
That’s the reason why most S-REITs opt to go that way, which also results in consistent dividends quarter after quarter for their unitholders.
On top of that, unit holders that are trading their REITs through Singapore’s Central Depository or CDP are not subjected to withholding taxes,
which means they get whatever amount that was declared as dividends without having to pay for anything else unlike other countries.
The challenge, however, is that most people do not know the value of the REITs they are buying into
and whether or not it is worth their money.
Like your average share in the stock market, a REIT also has an intrinsic value.
However, rather than coming up with a valuation based on their earnings and cashflows,
the value of a REIT is usually determined by their dividend history or Net Asset Value.
Still, this information can sometimes be difficult to obtain without leafing through thick financial reports,
And that is even before you eventually sit down to work on the calculations using the information you’ve just found.
That’s the reason why the team at WealthPark recently came up with a valuation tool specifically for REITs,
including a function called comparative valuation, featuring an easy-to-read valuation chart based on the REIT’s Dividend Yield and Price/ NAV ratio over the years.
Watch as Gideon and Alex walk you through this feature, and start earning your REITs dividends Smarter, Faster and Easier!