Reits

13TH PACIFIC RIM REAL ESTATE SOCIETY ANNUAL CONFERENCE Fremantle, Perth, Australia 21 – 24 January 2007

Stability of Dividends and FFOs: The Case of REITs in Malaysia

Ting Kien Hwa and Mohd Yunus Abdul Rahman

Department of Estate Management Faculty of Architecture, Planning & Surveying

University of Technology MARA

40450 Shah Alam, Selangor Malaysia

Telephone : 603 - 5544 4217, Fax : 603 – 5544 4353, e-mail : tingkienhwa@yahoo.com

Keywords : dividends, FFOs, LPTs, Malaysia

13th Pacific Rim Real Estate Society Annual Conference

Ting Kien Hwa

Stability of Dividends and FFOs: The Case of REITs in Malaysia

Abstract

Historically, the dividends of real estate investment trusts (REITs) contribute significantly towards the total return of REITs. This paper examined whether dividend returns of REITs/LPTs in Malaysia are affected by economic conditions and whether the level of dividends declared could be sustained in a weak economy. The research shows that the dividends declared by listed property trusts (LPTs) are found to be not stable as it is affected by the level of funds from operations (FFOs) attained by LPTs. FFOs are in turned affected by its sources of income. LPTs with investments of unstable market values e.g. shares which have declined in values is found to affect FFOs due to the need to account for its diminution of values in the accounts. The findings have an impact on investors who expect consistent dividend distributions from LPTs thereby affecting their investment allocations on LPTs.

Keywords : dividends, FFOs, LPTs, Malaysia

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13th Pacific Rim Real Estate Society Annual Conference

Ting Kien Hwa

Introduction Real estate investment trusts (REITs) have traditionally been able to attract investors because of their relatively low risks and high dividend yields. The high dividend yield of REITs is the main reason investors invest in the REIT market. Investors e.g. pensioners who rely on regular dividend payments are...