Before I begin, I like to briefly explain how a REIT earns income. 

Take IGB REIT as an example. 

It owns two retail malls in KL namely, MidValley Megamall and the Gardens. For years, they earn recurring rental income from 700+ commercial tenants such as McDonald’s, Starbucks, GSC and so on. Of which, they incur costs to maintain & upkeep the two properties, administration costs and interest costs. Its proceeds are income that can be distributed to IGB REIT’s unitholders. 

As a Malaysia-listed REIT (M-REIT), IGB REIT could distribute >90% of its income to its unitholders to be tax-exempt at the corporate level. These distributions to unitholders shall be taxed based on the unitholders’ status. Hence, for investors who’re individuals, there’s a 10% withholding tax on the “taxable portion” of its income distributed. 

So, How Do We Calculate its Net Income Distribution per Unit?

First, we can visit the official website of Bursa Malaysia. Then, click on company announcements as illustrated below:

Source: Bursa Malaysia

Second, locate the search bar on the left side of your screen and type “IGB Real Estate Investment Trust” and “Entitlements” and click “Search”.

Source: Bursa Malaysia

Third, we would identify income distribution for the last 12 months as follows:

Source: Bursa Malaysia

Fourth, we can click on the first income distribution. From it, we would find IGB REIT’s entitlement description stating 2.96 sen, comprising 2.91 sen taxable and 0.05 sen non-taxable. So, it means that we need to deduct the 10% withholding tax off from 2.91 sen. Then, we can calculate its net income distribution for that quarter by adding 0.05 sen non-taxable as follows:

Fifth, repeat the process above with the remaining three income distributions. I believe you’ll figure out that IGB REIT’s net income distribution per unit is 9.586 sen as follows:

Now, How Do We Calculate its Net Distribution Yield?

Currently, IGB REIT is trading at RM 1.82 per unit. Thus, its net distribution yield is calculated to be 5.27%. 

Net Distribution Yield 
= Net income distribution / Stock Price x 100%
= RM 0.09586 / RM 1.82 x 100%
= 5.27%

So, Is This Good or Bad? 

I believe this boils down to your needs. For instance, if your objective is to earn at least 4% a year in distribution yields, then, it’s good. But, if you require about 6% per year, then it’s not good for you. One man’s meat is another’s poison. So, it’s best to stick to your game plan when investing than to invest based on what others have to say about it. 

Personally, as an investor, I would take this 5.27% a year and compare it with: 

1. Its past historical average. 
2. Other M-REITs such as Sunway REIT, Axis REIT, KLCCSS … etc. 

Only from comparison, we can find the most suitable deals for ourselves. 

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Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with Co-Founded, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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