Domestic listed real estate investment companies (REITs) are finalizing settlement of account dividends and speeding up shareholder returns. Even amid headwinds such as high interest rates and asset value reappraisals, they are focusing on securing dividend stability by highlighting excess dividends using depreciation and tax-exempt dividends.
According to the Financial Supervisory Service's electronic disclosure system on the 1st, major listed REITs recently held board meetings and finalized and disclosed dividends per share (DPS) and dividend yields on market price.
Among listed REITs that recently filed disclosures, the one with the highest dividend yield on market price was KB Star REIT(432320). KB Star REIT decided on a cash dividend of 170 won per common share, recording a dividend yield on market price of 7.5%. Including new shares to be issued in a paid-in capital increase (49.35 million shares), it plans to pay about 25.6 billion won in dividends to a total of 150.76 million shares.
Attempts to diversify dividend funding to boost shareholder value also stand out. IGIS Residence REIT decided on a dividend of 150 won per share (dividend yield on market price 3.8%) and covered about 34.1% (1.887 billion won) of the total dividend of 5.53 billion won with transfers to capital reserves. This is a tax-exempt dividend source that is not included in dividend income under the Corporate Tax and Income Tax Act. NH All One REITs(400760) also finalized a dividend of 150 won per share (dividend yield on market price 4.9%) through a disclosure on the 21st. The entire dividend will be funded by transfers from additional paid-in capital, which is tax-exempt under the Income Tax Act.
Measures for excess dividends within the scope of depreciation under the Real Estate Investment Company Act are also being used. Shinhan Alpha REIT added excess dividends from depreciation (1.836 billion won) to net income (21.8 billion won) and finalized dividends of 182 won per common share (dividend yield on market price 2.95%) and 411 won per preferred share (dividend yield on market price 2.74%).
E KOCREF CR-REIT, through a disclosure on the 28th, decided on total dividends of 11.006 billion won by adding 3.066 billion won in excess dividends from depreciation to net income of 7.94 billion won. The dividend per share was set at 173 won, and the dividend yield on market price was set at 5.0%.
K-TOP REITs(145270) resolved to pay dividends of 2.33 billion won (50 won per share, dividend yield on market price 5.2%), equivalent to 69.0% of distributable profits (about 3.38 billion won). D&D platform REIT(377190) set 120 won per share (dividend yield on market price 3.89%), and Samsung FN REITs, which pays quarterly dividends, decided on 69 won per share (dividend yield on market price 1.0%).
◇ The flip side of excess and tax-exempt dividends… "In effect, pulling forward future reinvestment capacity"
However, some note that the strategy of diversifying dividend sources may end up being a stopgap that eats into REITs' long-term asset reinvestment capacity. Excess dividends using depreciation do not involve actual cash outflows, but they draw in advance on funds that should be accumulated to prepare for asset depreciation. The analysis is that if money that should be used for major repairs of aging assets or for reinvestment is consumed as dividends, they will have no choice but to rely on additional borrowing or paid-in capital increases going forward.
Tax-exempt dividends funded by capital reserves and additional paid-in capital also use capital paid in at the time of capital increases, not profits generated from operating activities. If repeated, not only does equity capital shrink, but leverage capacity available when adding new assets also decreases.
A REIT industry official said, "Excess and tax-exempt dividends are legally permitted tools and are useful for enhancing shareholder value and corporate value," but added, "Using them routinely ultimately amounts to pulling forward future capacity to expand assets."
◇ Illusions in dividend yields on market price… realized returns vary widely by dividend cycle and timing
Some also note that, depending on each REIT's dividend cycle and stock price level, the disclosed dividend yield on market price can create an illusion, calling for investor caution. For REITs that pay semiannual or quarterly dividends, the dividend yield on market price for a single settlement of account period is shown lower, but the annualized yield rises sharply.
Hanwha REIT(451800) said in June that the dividend yield on market price for the first-half dividend was 2.0%, but its own annualized dividend yield on market price was 4.1%, more than double. NH Prime REIT also disclosed last month that it would pay 837 won per share (dividend yield on market price 19.1%) as a six-month dividend. At first glance, it looks like an ultra-high dividend stock, but this figure reflects a one-off semiannual dividend amount accumulated from an asset sale. It is not a dividend rate sustained annually; the profit generated by selling a building was concentrated in this six-month dividend, causing the figure to surge temporarily.
For liquidation-type REITs, special dividends require even more investor caution due to principal loss risk. Koramco The One REIT(417310) completed the sale of its core asset, the Yeouido Hana Securities building, and the board on the 27th resolved a special dividend of 8,900 won per share. The total dividend amount is 359.56 billion won, and the dividend yield on market price reaches 81.4%.
Based on the disclosed reference price (the closing price on Aug. 26) of 11,030 won, the residual value excluding the special dividend (8,900 won) was calculated at 2,130 won per share. Since investors who buy on or after the ex-dividend date, the 28th of this month, are entitled only to the residual asset value without the special dividend, the stock price on the ex-dividend date plunged to as low as 2,335 won, down 78.64% from the previous trading day (10,930 won). In response, Koramco The One REIT also provided prior guidance to investors on Aug. 26 about the possibility of a sharp stock price drop.