Potential returns from two key sources: capital appreciation and dividend income
From an income perspective, Asia Pacific REITs offer relative attractive forward yields compared to broader equities and government bonds.
Yield comparison vs Equity/Government bond1
The dividend component of REITs has historically offered investors relatively attractive and sustainable sources of income. Since the index's inception at the end of 2008 (as at 31 December 2022) AP REITs has historically delivered an annualised return of 11.4% p.a., of which 5.8% represents capital appreciation and 5.5% is from dividend income. From a defensive perspective, we believe the stable income stream of REITs also provides a buffer to help cushion overall losses during down markets.
Asia REITs vs Asia Equities (December 2008 to December 2022)2
Inflation that is a result of economic growth tends to translate into greater demand for real estate and subsequent higher occupancy rates, supporting growth in REIT cash flow and dividends.
The anatomy of a lease may include annual step ups and rental increases that are tied to CPI. As a result, real estate is generally seen as a good hedge against inflation. The dividend return of Asia REITs has mostly exceeded inflation of major REIT markets (as measured by CPI) in past 10 years.
Asia REITs dividend return has outpaced inflation in the region3
1. Bloomberg as of 31 December 2022. REIT Yield and Equity Dividend Yield are the projected 12-month yield from Bloomberg consensus. REIT Yield: Australia REIT – S&P/ASX 200 A-REIT Index, Hong Kong REIT – FTSE EPRA/Nareit Developed REITs Hong Kong Index, Singapore REIT – FTSE ST Real Estate Investment Trusts index. Equity Dividend Yield: Straits Times Total Return Index, Hang Seng Index, S&P/ASX 200 index. 10 Year Government Bond Yield = Local Generic 10- year Government Bond Yield. Projections or other forward-looking statements regarding future events, targets, management discipline or other explanations are only current as of the data indicated. It is not possible to invest directly in an index. There is no assurance that such events will occur, and if they were to occur, the result may be significantly different than that shown here.
2. Bloomberg, as of 31 December 2022. Total return of AP REITs performance is the FTSE EPRA Nareit Asia ex-Japan REITs Total Return USD Index, while price return is taken from the FTSE EPRA Nareit Asia ex-Japan REITs Index. Dividend returns are calculated as the difference between the two indices. Indices are rebased to 100 as of 31 December 2008. It is not possible to invest directly in an index. Past performance is not indicative of future performance.
3. Bloomberg, The World Bank, as of 31 Dec 2022. Asia REITs measured by FTSE/EPRA Nareit Asia ex Japan Index (capped). It is not possible to invest directly in an index. Past performance does not guarantee future results.