South African REITs is trading at attractive prices
South African REITs are the highest dividend yielding REITs, globally. With a 6.98% dividend yield against an average of 4.24% offered by US REITs, and 3.53% on offer globally (ex-US); South Africa (EZA) and its real estate is sure to attract investors. More so, South African REITs are currently trading at very attractive prices. The aforementioned figures assume the Vanguard REIT ETF (VNQ) as representative of US REITs, and the Vanguard Global ex-US Real Estate ETF (VNQI) as representative of Global REITs (excluding the US).
Trading at over 70% discount to US REITs
By comparison, with an average P/E of 13.29, South African REITs are trading at over 70% discount to US REITs, which are available at a P/E of around 44.66 (according to data derived from Bloomberg on June 5). Global REITs (ex-US) averages stand at 12.07 P/E. Moreover, South African REITs also sport a lower debt-to-common-equity ratio of 55.64%, as compared to 116.16% for US REITs, and the global (ex-US) average of 77.10%.
These South African REITs shine above the rest
We took a deeper look at the VNQI and into South African REITs that are a part of its portfolio. The table above is a list of South African REITs that are currently trading at lower prices while offering higher yields than their US and other global counterparts. For instance, the Rebosis Property Fund, which trades under the symbol REB on the Johannesburg Stock Exchange, offers 11.15% dividend yield, while trading at a nominal P/E ratio of 4.45. REB had returned 7.5% to investors YTD as of June 5.
Similarly, Arrowhead Properties, trading under the symbol AWA on the JSE, has returned 13.16% YTD. The REIT offers a 9.36% dividend yield and is currently trading at 8.25 times price to earnings.
Redefine Properties Limited also trades on the US OTC market under the symbol RDPEF. The JSE-traded stock, RDF is currently trading at a 10.15 P/E and offers a generous dividend yield of 8.49%. RDF is up 4.54% YTD.