Does a high REIT yield signal lower dividend growth?

Dividend yield is one of the most common measures investors use when comparing real estate investment trusts or REITs.

When one REIT offers a dividend yield of 12 percent while another offers only 6 percent, investors would naturally prefer the higher-yielding REIT because it provides twice as much cash income for the same amount invested.

But does a higher dividend yield necessarily mean a better investment? While dividend yield tells us how much income we are receiving today relative to the price we pay, it may also contain information about what the market expects from those dividends in the future.

In a 2012 study published in the Pacific-Basin Finance Journal, Andrew Ang, then a finance professor at Columbia Business School, found that dividend yields contained significant information about future dividend growth. Using US market data from 1927 to 2000, Ang found that higher dividend yields tended to predict weaker dividend growth.

The reason is that in a present value framework, a high dividend yield must reflect either expectations of lower future dividend growth, higher returns required by investors, or a combination of both.

This does not mean that investors should avoid high-yielding REITs. If a REIT offers a 12-percent yield and maintains its distribution, investors will actually receive that return in cash even without dividend growth.

This makes it important for us to understand what is driving the high yield, especially the REITs in the Philippine Stock Exchange where current dividend yields vary widely.

At the lower end, RL Commercial REIT (RCR) offers a dividend yield of about 5.9 percent, followed by Citicore Energy (CREIT) at 6.2 percent and Ayala REIT (AREIT) at 6.6 percent. At the higher end, DoubleDragon REIT (DDMPR) yields about 9.2 percent, Premiere Island (PREIT) 12.3 percent and VistaREIT (VREIT) 14.1 percent.

If higher dividend yields reflect weaker growth expectations, we should see this relationship in the historical distributions of REITs. In some cases, this appears to be true.

Filinvest REIT (FILRT), for example, saw its annual dividends fall from about P0.404 per share in 2022 to P0.243 in 2025. This represents an average annual decline of 15.6 percent. Its share price also dropped from its P7 initial public offering (IPO) price to about P2.92, which pushed its current yield above 8 percent.

However, the same relationship does not apply to every REIT. VREIT currently offers the highest dividend yield among REITs at about 14 percent, but its distributions have actually increased.

Its annual dividend rose from about P0.1574 per share in 2023 to P0.1980 in 2025, which represents an annual growth rate of about 12 percent. Despite this growth, VREIT’s share price has fallen from its P1.75 IPO price to about P1.31 today.

MREIT shows a similar pattern, although its distribution growth has been much slower. Its annual dividend increased from about P0.974 per share in 2022 to P1.002 in 2025, which is equivalent to growth of less than one percent annually, yet its share price remains below its P16.10 IPO price at about P13.92.

AREIT, meanwhile, shows a different pattern. Its annual dividend increased from about P1.69 per share in 2021 to P2.37 in 2025, equivalent to annual growth of nearly 9 percent. Unlike VREIT, AREIT’s share price also increased from its P27 IPO price to about P38. As its market price appreciated, AREIT’s current dividend yield declined to around 6 percent despite the growth in distributions.

The comparison shows that high dividend yields can arise for very different reasons. Looking at the broader REIT market, six of the eight listed REITs have increased their annual distributions from their first full year through 2025.

See Also

First Gen seals 25-MW supply deal with AGI

AREIT, CREIT and RCR now trade above their IPO prices, while MREIT, PREIT and VREIT remain below theirs despite higher distributions.

The other two, FILRT and DDMPR, have seen their annual distributions decline and both now trade substantially below their IPO prices. This suggests that historical distribution growth alone cannot explain the differences in current REIT yields.

This is especially relevant because REIT distributions are backward-looking, while share prices reflect expectations about the future. A REIT may still report higher distributions today even as investors begin to worry about refinancing costs, lease renewals, occupancy or the ability of its sponsor to support future asset growth.

In such cases, the share price can fall before any weakness appears in the distribution record. This helps explain why a REIT with a history of rising dividends can still trade at a high yield.

This brings us back to our framework. A high REIT yield does not necessarily mean that its distributions will decline. It may reflect expectations of slower future growth, the higher return investors require for taking risk, or both.

From an investment perspective, a high REIT yield should, therefore, be viewed not simply as an attractive source of income, but as a reflection of what is already built into the share price. The challenge is determining whether the additional income is enough to compensate investors for the risks they are taking.

Henry Ong is a registered financial planner of RFP Philippines. To learn more about investment planning, attend the 118th batch of RFP Program this October 2026. To register, email info@rfp.ph.