DETERMINANTS OF DIVIDEND YIELDS FOR ASIA REITS

Abstract

Since REITs was first started in Japan in 2001, the average dividend yield of Asia REITs has fallen year on year. As dividend yield is one of the factors investors look for when investing, it is worthwhile to examine the causes for dividend yield compression. The findings from the regression analysis depicts that earnings per share, distribution per share, size and debt to equity ratio influence the dividend yield and dividend yield spread of REITs while return on equity of current and past period are tested to be insignificant. The regressions results are in tandem with the hypotheses postulated in the report. Firstly, the coefficient of earnings per share and distribution per share are negatively and negatively related to dividend yield respectively. Secondly, size of Asia REITs is found to be negatively related to dividend yield. This is consistent with past works that suggested that large REITs enjoy economies of scale in their operations. However, when tested on Singapore REITs, size is not a significant variable in determining dividend yield and may be due to the REITs manager being equally efficient regardless of size. Lastly, the results suggested that with higher leverage, dividend yield is higher. This is because higher debt is deemed to have higher risk on the REITs and thus a higher premium is expected. The debt ratio is found to be insignificant for “Small Cap”, “ex-Japan”, and “Focused” REITs and suggests that dividend yield is more sensitive to other variables other than debt.