Unlock Higher Yields: 3 Data Centre REITs Set for Dividend Hikes This Year
Of all the REIT subsectors, retail and industrial have held up best over the past few years.
Within the industrial sub-sector, the data centre space offers tantalising opportunities for investors.
The surge in digitalisation, along with higher demand for cloud computing services, has contributed to the growth of this asset class.
Income investors can gain exposure to data centres by purchasing REITs that are either pure-play data centre REITs or through REITs with data centres within their portfolios.
Here are three Singapore data centre REITs that look well-positioned for higher dividends this year.
CapitaLand Ascendas REIT, or CLAR, is Singapore's oldest industrial REIT. Its portfolio includes 226 properties spread across Singapore (65%), the US (12%), Australia (13%), and the UK/Europe (10%).
CLAR's total assets under management (AUM) stood at S$16.9 billion as of 31 March 2025, and around 8% of its AUM comprises data centres located in Singapore and the UK.
The industrial REIT reported a commendable set of earnings for 2024 despite the twin headwinds of inflation and high interest rates.
Gross revenue rose 2.9% year on year to S$1.52 billion while net property income (NPI) increased by 2.6% year on year to S$1.05 billion.
The REIT's distribution per unit (DPU) inched up 0.3% year on year to S$0.15205.
For the first quarter of 2025 (1Q 2025) business update, CLAR reported a positive rental reversion of 9% for 1Q 2025.
This was slightly lower than the prior year's positive rental reversion of 11.4%.
Overall, CLAR reported a positive rental reversion of 11% for its portfolio.
The REIT also has ongoing projects that are undergoing development, redevelopment or refurbishment to improve the quality of the portfolio.
These projects, costing a total of S$498.4 million, will be progressively completed from 3Q 2025 to 1Q 2028.
CLAR maintained a high portfolio occupancy of 91.5% as of 31 March 2025 with moderate gearing of 38.9%, allowing the REIT to continue acquiring yield-accretive properties using debt financing.
Keppel DC REIT is a data centre REIT with a portfolio of 24 data centres across 10 countries.
As of 31 March 2025, the REIT's total AUM stood at approximately S$4.9 billion.
Keppel DC REIT's 1Q 2025 results packed a punch as it was the only REIT to report a double-digit year-on-year increase in its DPU.
Gross revenue jumped 22.6% year on year to S$102.2 million while NPI shot up 24.1% year on year to S$88.1 million.
Finance income was boosted by its Australian data centre note, climbing 40.1% year on year to S$3.9 million.
DPU increased by 14.2% year on year to S$0.02503.
Keppel DC REIT maintained a high portfolio occupancy of 96.5% and also enjoyed a positive rental reversion of 7% for the quarter.
The manager plans to rely on acquisitions in the target markets of Japan, South Korea, and Europe as a driver of its AUM and DPU.
With aggregate leverage at just 30.2%, this leaves significant debt headroom for the data centre REIT to conduct yield-accretive acquisitions.
Management identified artificial intelligence (AI) as an enduring trend that should boost demand for data centres serving AI inference workloads.
With positive rental reversions and the continued strong demand for data centres, Keppel DC REIT should do well in the medium term.
Digital Core REIT, or DCR, is also a data centre REIT with a portfolio of 11 data centres spread across the US, Canada, Frankfurt (Germany), and Osaka (Japan).
The REIT's AUM stood at US$1.7 billion as of 31 December 2024.
DCR reported an encouraging set of financial results for 1Q 2025.
Revenue leapt nearly 80% year on year to US$44.2 million, largely because of acquisitions conducted in the past year.
NPI climbed 41.8% year on year to US$22.4 million while distributable income rose 9.9% year on year to US$11.7 million.
The REIT enjoyed a very high portfolio occupancy of 98%, and its assets are all of freehold tenure.
With aggregate leverage at 38%, DCR has debt headroom of around US$438 million before it hits the mandatory 50% gearing limit.
The REIT recently concluded the acquisition of a 20% stake in a second data centre from its sponsor, Digital Realty Trust (NYSE: DLR).
DCR also established a US$750 million medium-term note programme to reduce reliance on bank debt and to set the stage for faster growth.
The data centre REIT has a right-of-first-refusal over its sponsor's pipeline of assets worth US$15 billion.
These assets have a minimum occupancy of at least 90% and do not require any material asset enhancements within two years.
This healthy pipeline means that DCR could engage in more yield-accretive acquisitions in the months and years to come, helping to boost its DPU.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Digital Core REIT.
The post Unlock Higher Yields: 3 Data Centre REITs Set for Dividend Hikes This Year appeared first on The Smart Investor.
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