Did you pick the right REIT?

As we all know by now, REITs have outperformed the general index. High yielding REITs were plenty back in 2010, slowly they are becoming overpriced. If you have positions in it, you are probably holding onto them till the last minute to see how much further they can go. I know i am. I decided to highlight some winning REITs who are still offering above average dividend returns. 

 Of course, this is not an invitation to buy into these selected REITs because most of them are already quite expensive. Did you pick these REITs back in 2010?
I held 4 out of 5 of these top yielding REITs in the past. Recently sold Suntec REIT and First REIT at a very good profit making me happy. While i still hold onto Ascott REIT and Sabanna REIT, i do ask myself how much longer do i have to hold them? The average current yield in each sub-group is already close to 5. Will we see a drop in popularity when this average drops below 4? That is definitely a yes. 

For the time being though, let me be greedy and hope for bigger returns. We should be worried when average yield goes below 4%. But i suppose Ascott REIT is something i will have a hard time deciding to sell.

How much higher can S-REITs Go?

Recently I have been paying attention to Singapore REITs because i am invested in some of them for over a year. Having also taken profit too early on Suntec REIT, i wonder if I should have adjusted my exit strategy. 

Fellow blogger KFC1973-Stock wrote an article today: "REIT Sector Still outperform the benchmark"
 
If you read the article, S-REITs have beaten the broader market YTD and i believe it has been outperforming the benchmark for a couple of years now. This makes me worried, because i look at valuations, for me it is starting to get overvalued. One has to remember that during the 2008 crash, almost all REITs got slashed pretty badly (almost 60-80% for some). So definitely REITs are vulnerable to market crashes...no doubt!  

I suppose when looking at REITS, we value it based on dividend returns above price. Isnt that why people are still buying overvalued REITS because it still pays out more than 5% dividends?
REITs start to get unattractive as their dividend rate drops and this is inversely proportional to its market price. I would still HOLD onto several REITs because of their potential but I'll be out as soon as dividend rate drops below 4%. One more thing, very important... As soon as interest rates go up, its game over! Cost of borrowing goes up, dividend yields will drop. REITs will be in trouble.

Of course i regret selling First REIT and Suntec REIT too early. They are trading much higher then my profit taking target. Sigh*
In my portfolio, I consider Hospitality REITs one of the strongest in Singapore and i would hold on to them. Industrial REITs would be the first to go as soon as their dividend rate drops! Remember they were the worst affected during a market crash. Look at graph below from FSM; Pick up REITs when price is low, dividends are high. In 2009 average dividend yield from S REITs was super high!

Disclaimer: I have long positions in Far East Hospitality, Ascott Residence Trust, Cache Logistics, Sabana Shari'ah REIT. Please do your own due diligence before investing.