As volatility in the domestic stock market widens, investors are turning their attention to stable high-dividend stocks. After funds flocked to bank and financial shares, money is also flowing into relatively undervalued real estate investment companies (REITs).
REITs pool money from many investors to invest in real estate and real estate-related securities, and pay out to investors the rental revenue or capital gains generated. By type, self-managed REITs must distribute 50% in dividends, while externally managed and corporate restructuring REITs must distribute more than 90%, resulting in very high dividend tendencies.
According to ETF Check on the 24th, between last week (the 17th to the 21st), 95.3 billion won in funds flowed into "TIGER REITs Real Estate Infrastructure," ranking 11th in ETF net inflows. On the 20th alone, 48.2 billion won flowed in, and the ETF became the first domestically listed REITs ETF to surpass 1 trillion won in net worth.
TIGER REITs Real Estate Infrastructure ETF, listed in Jul. 2019, is Korea's first REITs ETF. It includes domestic REITs as major holdings such as Macquarie Korea Infrastructure (15.7%), SK REIT (12.3%), KB Balhae Infrastructure (10.3%), LOTTE REIT (9.6%), and ESR Kendall Square REIT (9.2%).
The reason money is pouring into REITs is that preference for high-dividend assets has grown clear amid heightened stock market volatility. In fact, the KOSPI, which opened at 4,170.63 points on the 14th, plunged 3.81% in a day, rebounded 1.94% the next day, and then fell 3.32% again the day after, showing an extreme roller-coaster market.
Yoon Jae-hong, a researcher at Mirae Asset Securities, said, "As stock market volatility expanded, preference rose for low-volatility assets such as cosmetics, consumer staples, and REITs last week, leading to fund inflows."
Because REITs are strongly dividend-oriented, their dividend-to-price ratio (dividend yield) tends to be high. According to the securities information portal Save-ro, last year's No. 1 by dividend yield was Aegis Value Plus (16.6%), which paid 823 won per share in dividends. NH Prime REIT (14.5%) ranked third, Shinhan Alpha REIT (11.89%) fifth, and JR Global REIT (11.3%) ninth.
In particular, the fact that bank and financial stocks, the representative high-dividend shares, have already risen sharply is another reason interest has grown in undervalued REIT assets. So far this month (the 3rd to the 14th), the KRX Insurance Index rose 6.09% and the KRX Bank Index climbed 7.36%. During the same period, the KRX REITs TOP10 Index rose 0.91%.
However, because REITs invest in physical real estate, vacancies can occur during an economic slowdown, which can lower returns. According to the Korea Real Estate Board (REB), last year's office vacancy rate in Seoul was 5.6%, and the vacancy rate for grade-A logistics centers in the greater Seoul area was about 23% based on CBRE data, showing signs of oversupply.
Lee Kyung-ja, Head of Team of the alternative investment team at Samsung Securities, said, "Office vacancies have continued to stay around the 6% to 7% range, and logistics centers are posting double-digit vacancy rates due to oversupply," but added, "For listed REITs, the Ministry of Land, Infrastructure and Transport (MOLIT) and the financial authorities review asset stability in the authorization process and listing examination, so most tenants are already secured, enabling stable management regardless of the market vacancy rate."
The Head of Team said, "Individual REITs are small in size and often conduct rights offerings, making them hard for retail investors to manage," adding, "If you want the benefits of diversification, REITs ETFs are suitable, and if in-depth analysis of specific assets is possible, investing in individual REITs is good."