Buying real estate investment trusts, or REITs, can be one effective way to build income and diversify your shareholdings. Here are three paying big dividends right now.
What Are REITs?
ASX-listed real estate investment trusts are listed companies that own real estate and typically aim to pay large distributions from the rent they receive. REITs can own different types of property, like residential, commercial, industrial, shopping centres, aged care facilities or storage units. Just about anything, really.
The Australian Finance Podcast episode below explains REITs in more detail:
Scentre Group
Scentre Group
(ASX: SCG) is one of the largest ASX REITs with a market capitalisation of more than $21 billion. Scentre Group is the owner of 41 Westfield shopping centres across Australia and New Zealand.
While there is some talk of shopping centres struggling due to online shopping, Scentre Group reports that its centres received 535 million visits in 2018, suggesting shopping centres aren’t exactly dead yet.
REITs with a focus on shopping centres tend to pay some of the largest dividends and Scentre Group is no exception with a trailing dividend yield of 5.62%. Another example is Shopping Centres Australasia Property Group (ASX: SCP) which offers a 5.74% dividend yield. Keep in mind, both of these companies pay unfranked dividends. Franking credits are explained in detail here.
Charter Hall Long WALE
The Charter Hall Long WALE REIT (ASX: CLW) is one of the listed funds managed by Charter Hall Group (ASX: CHC), a leading Australian property group.
The Long WALE REIT (WALE stands for weighted average lease expiry) owns a portfolio of 118 properties across the office, industrial, retail and agri-logistics sectors. These properties are together worth $2.13 billion, and CLW has these properties leased with a 99.6% occupancy rate and a WALE of 12.5 years.
Better still, CLW is able to increase the rent on average 2.8% per year. Dividends increased around 4.5% between 2018 and 2019 and CLW currently offers a trailing dividend yield of approximately 4.85%. These dividends are also unfranked.
Abacus Property Group
Abacus Property Group (ASX: ABP) is in a different space again from CLW and Scentre Group. Abacus invests in a portfolio of commercial and self-storage properties, most of which are based in major centres on the Eastern seaboard of Australia. The portfolio is currently worth $2.1 billion.
Abacus shares have fallen around 8% over the last three months but are still up more than 18% year-to-date. Dividends have been slowly growing every year since 2016 and the current trailing dividend yield is 4.76%.
Risks
The Australian property market is a hot topic right now and I’m not about to pick which direction it’s heading, but it’s worth approaching REITs with some caution in the current environment. The large share price rises that most ASX-listed REITs have experienced this year also means that some don’t represent particularly good value right now. So, while dividends are enticing, consider the price you’re paying.
For other proven, dividend-paying shares, check out the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
