The headline of SPH REIT’s press release last Friday read “SPH Reit 2Q 2019 Distribution Income 2.5% Higher Year-on-Year”.

However, looking into the numbers, the cash distribution available was only up 1.0% and the DPU increase was even smaller at +0.4%. This is despite SPH Reit increasing the “cash payout ratio” from 96.8% last year to 97.5% this year.

I think they upped the payout ratio because they wanted to maintain the DPU or show a small increase. Showing a negative DPU doesn’t help in shaping investors’ perception after they just did 2 quick acquisitions within months. Acquisition is supposedly yield accretive, a decline in DPU will tell an opposite story.

The increase in the number of units usually by about 2.1 million units per quarter doesn’t help. This is the payment to the management company for managing the Reit and for helping shareholders find and successfully acquire new assets.