A stable dividend of 4-6% per year… Ritz with a lot of money
Amid increasing volatility in the stock market, money is pouring into domestic listed REITs (real estate investment trusts) that can expect stable dividends. REITs are representative dividend stocks that return more than 90% of profits from real estate incorporated as assets to shareholders as dividends. REITs are considered a representative inflation hedge asset as the ratio of real estate must be at least 70% of total assets.
According to the financial investment industry, as of May 4, the market capitalization of 19 listed REITs in Korea was 8,350.6 billion won, up 9% from a month ago (7.924.9 trillion won). Compared to the end of last year (7.4 trillion won), it increased by 13%. Compared to the market cap of 3 trillion won just two years ago, the size has increased nearly threefold recently. It is analyzed that the attractiveness of REITs, which stably pays dividends of 4-6% per year, stands out as the stock market shakes as the base rate rises in the midst of hyperinflation.
According to the Korea Exchange, the average increase rate of 19 listed REITs for the past three months as of the end of April was 13%. It far outperformed the KOSPI growth rate (2%) during this period. The stock price of KORAM CODER ONE REITs, which was most recently listed at the end of March, rose 19% within a month after listing. This product and SK REITs pay dividends four times a year, and most of the remaining REITs pay dividends twice a year.
According to the Korea REITs Association, the average dividend rate of listed REITs reached 7.1% as of 2020. This year, the average dividend yield is expected to be close to 5%. Downtown offices, shopping malls, and hotels, which are the major assets of REITs, are also expected to benefit from the re-opening. Bae Sang-young, an analyst at Daishin Securities, explained, “This year, domestic REITs stand out because of their excellent performance amid inflation and stock market corrections.”
However, it should be noted that the controversy over the economic recession is ongoing, especially in the United States. If the economic downturn materializes, the vacancy of REITs holdings increases and the value of buildings decreases, which can lead to losses. Analyst Bae Sang-young said, “For the past three years, REITs with various assets as underlying assets have been listed, and qualitative and quantitative growth has been achieved through capital increase, asset incorporation, and dividend growth. As REITs continue to grow in size, it will become more important to selectively invest in REITs that invest in promising fields such as digital centers and logistics centers.”
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