Friday, February 08, 2008

A good time to invest in REITs?

When REITs (Real Estate Investment Trusts) were first introduced a few years ago, it provided a yield of more than 6%. The yield later dropped to 4%, giving an appreciation of more than 50% in the price of the REIT. The dividend payout also increased, due to higher rental income. This led to a further gain in the REIT.

The price of many REITS have dropped by more than 20% from its recent peak. It is now possible to find a few REITS that yield more than 5%. This is an attractive yield.

If there is an economic slowdown, there is the risk that rental income may drop in the future, and reduce the yield on the REIT. This risk is worth taking. Even if the rental income drops by 20%, the REIT will still be able to give a yield of more than 4%.

I have decided to invest in REITS at this time. (Previously, I found the price to be too high).
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4 comments:

Collin said...

Mr Tan,

What do you think of Allco Reit?

I am intending to diversify my portfolio with Allco Reit.

February 08, 2008 3:32 PM
Tan Kin Lian said...

I do not wish to comment on specific stocks.

In the case of Allco REIT, I have to declare that I have invested in this stock previously, when the price was much higher, and recently, when it has dropped significantly.

February 08, 2008 5:47 PM
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February 29, 2008 6:35 PM
Mike said...

Hi Mr. Tan,

Do you think good REITs can be bought and hold for many years (i.e. 10 years) to come?

REITs often need to raise equity for funding or debt reduction. This kind of activity seems like a forceful way to take back all the dividend payout from the shareholders.

So do you think REIT is a good investment for buy & hold?

Thanks.

Best regards,
Mike

June 24, 2009 11:12 AM

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