Q&ACategory: Dividend StocksDPU from Operation
Benjamin Chua asked 4 weeks ago
Hi, Recently I came across these terms when reading articles about S-REITS - "DPU from Operation" and "Operating Distribution Proportion". Not sure they are referring to the same thing, could you explain what is it and what is the significant about this metric? Also, what would be the healthy % of this value? I tried to google but can't seem to find any relevant info on this. Thanks!
1 Answers
Rusmin Ang Staff answered 4 weeks ago
Hi Benjamin, May i know which REIT are you referring to?
Benjamin Chua replied 3 weeks ago

This is a generic term I saw when reading a blogpost analysing S-REITS. One of the companies quoted in the post is Frasers Logistics & Commercial Trust.

Rusmin Ang Staff replied 3 weeks ago

Not sure if I get your question right but let me try answering below.

A REIT normally pays out more than 90% of its distributable income to enjoy the tax benefit. The definition of distributable income usually adjusted for management fees, trustee’s fees, fair value gan/loss and taxation, etc. At times, we may see some REITs add on additional distribution of capital from their divestment gain or retaining some of the income for general working capital. Generally I will take the DPU as it is for the calculation of yield but exclude the DPU from capital since the latter is a one-off item. Therefore, we do not really need to calculate the payout ratio since most REITs payout more of its distributable income.

Benjamin Chua replied 3 weeks ago

Hi Rusmin,
This is the blogpost I’m referring to: https://www.reit-tirement.com/2024/06/capitaland-groups-reitsbiztrust.html
If you go the table for “Key Financial Metrics, Distribution Breakdown & Growth Trend”, there is distribution breakdown for “Operating Distribution Proportion”and the “Growth Trend” measures “DPU from Operation”.
May I know what is those terms mean?
Thanks!

Rusmin Ang Staff replied 3 weeks ago

I’m not exactly sure as these terms were being created by Vince (the author) but if I were to interpret it myself…

I think Vince is trying to tell us that Operating distribution proportion is the payout ratio of the REIT. DPU from operation is the sustainable DPU which being paid out from the rental income, not including any income support or capital gain from divestment. I usually use this to get the yield. Growth trend is a way for him to show us what the trend of the DPU over the last five years.

Benjamin Chua replied 3 weeks ago

alright, thanks Rusmin!