Philippine REIT yields can look attractive when share prices fall, but the recent experience of VREIT and PREIT shows why investors also need to ask whether those distributions will continue
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?
In a recent Philippine Daily Inquirer column, Registered Financial Planner Henry Ong examined this question using research by Andrew Ang, then a finance professor at Columbia Business School. The original article noted that a high dividend yield can reflect expectations of weaker future dividend growth, a higher return investors require for taking risk, or both.
Ang’s research gives us a useful way to understand what has happened to some Philippine REITs.
What Andrew Ang found
In his 2012 study published in the Pacific-Basin Finance Journal, Ang examined US market data from 1927 to 2000 to determine what dividend yields tell investors about future cash flows.
Most earlier research had focused on whether high dividend yields could predict higher future stock returns. Ang approached the issue differently. He asked whether dividend yields could also predict what happens to dividends themselves.
Ang found that dividend yields predicted future dividend growth more strongly than they predicted stock returns over a one-year horizon. In his annual regression estimates, more than 85 percent of the variation in log dividend yields was attributed to variation in dividend growth. He also found that a 1-percent increase in log dividend yield was associated with a 0.13-percent reduction in the forecast for dividend growth in the following year.
The value of a stock reflects the present value of the cash flows investors expect to receive. If the current dividend becomes unusually high relative to the share price, then the market is effectively telling us one of two things.
Investors may expect future dividend growth to be weaker, or they may demand a higher return because they perceive greater risk. Both can also happen at the same time.
This does not mean every high-yielding stock will eventually cut its dividend. Ang studied the broad US equity market, not Philippine REITs, so his findings should not be interpreted as a mechanical rule for individual stocks.
But the framework becomes particularly interesting when we apply it to the recent experience of Philippine REITs.
The Philippine REIT market tells different stories
Consider AREIT. Its first full-year dividend was about P1.69 per share. Its trailing distribution reached about P2.49, while its dividend grew at an average annual rate of about 8.8 percent through 2025.
An investor who bought AREIT at its P27 IPO price now earns a trailing distribution yield of about 9.2 percent on the original investment.
But AREIT’s share price has also appreciated to about P38, or roughly 41 percent above its IPO price. At today’s higher price, a new investor receives a yield of only about 6.6 percent.
CREIT shows a similar pattern. Its first full-year dividend was P0.145 per share compared with a recent trailing distribution of about P0.203. Its historical dividend growth rate through 2025 was about 18 percent.
At its P2.55 IPO price, the recent distribution translates to a yield on original cost of about 8 percent. But because CREIT’s share price has appreciated by about 29 percent to P3.30, its current yield is only around 6.2 percent.
RCR also trades above its IPO price and offers a current yield of about 5.9 percent.
These examples illustrate something investors sometimes overlook: a relatively low current yield can actually result from good performance.
If dividends rise and investors become willing to pay more for those dividends, the share price increases and the yield falls.
VREIT initially appeared to tell the opposite story
VREIT looked very different. Its annual dividend increased from about P0.1574 per share in 2023 to P0.1980 in 2025, equivalent to annual growth of roughly 12 percent. Yet its share price fell from its P1.75 IPO price to around P1.31.
Based on its historical distributions, VREIT appeared to offer an exceptionally attractive yield.
An investor could reasonably have looked at those numbers and concluded that the market was offering a REIT with rising distributions at a much cheaper price.
But something happened afterward that makes Ang’s framework particularly relevant.
VREIT had established a fairly regular distribution pattern. In 2025, dividends were paid in May, July and October, followed by another payment in January 2026.
Its next dividend of P0.038 per share was paid on May 29, 2026.
Its May payment was not a dividend from VREIT’s 2026 operations. VREIT’s own PSE disclosure identifies it specifically as the Q4 2025 cash dividend. The company said that the payment brought its distributions to at least 90 percent of distributable income for the year ended 2025.
As of Sept. 11, there had been no subsequent dividend declaration for 2026.
This means an investor looking at VREIT’s trailing dividend yield needs to be careful. The trailing number still contains distributions from the previous year. It tells us what shareholders received historically, but it does not necessarily tell us what they will receive over the next 12 months.
PREIT shows a similar pattern
PREIT’s experience is also worth examining. Its first full-year dividend was about P0.134 per share, and its distributions subsequently increased. Yet its share price fell from its P1.50 IPO price to around P1.04, a decline of about 31 percent.
The lower share price made its historical yield look increasingly attractive. PREIT had also developed a regular distribution pattern. In 2025, it declared dividends that went ex-dividend in May, June, September and December.
The December dividend was paid in January 2026. PREIT then declared P0.0349 per share in May 2026, which was paid on May 29.
But as of early September, this remained its latest declared dividend. The June and September distributions seen in the previous year’s pattern had not been repeated.
This does not prove that investors who sold VREIT and PREIT knew that their distribution schedules would change.
Share prices can fall for many reasons, and it would be difficult to establish exactly what individual investors expected, but the sequence is revealing.
The high yields appeared first. The change in the distribution pattern became visible later. This is very close to the economic intuition behind Ang’s research.
Why a falling price can send a warning
Suppose a REIT pays P0.20 per share annually and trades at P2.00. Its dividend yield is 10 percent.
Now suppose its share price falls to P1.25 while the historical dividend remains P0.20. Its apparent yield suddenly becomes 16 percent.
Nothing has happened to the historical dividend. What changed was the price investors were willing to pay for it.
If investors simply assume that the P0.20 distribution will continue indefinitely, the REIT suddenly looks extremely cheap.
But the market may be discounting something that has not yet appeared in the historical dividend figures.
This could be weaker future cash flows, refinancing costs, tenant problems, lease renewals, asset quality, sponsor concerns or simply a higher required return because investors perceive greater risk.
This is why trailing yield and prospective yield are not the same thing. Trailing yield measures what a company distributed during the previous 12 months relative to today’s share price.
Prospective yield depends on what it will distribute during the next 12 months. Only the first is known.
FILRT shows the other route to a high yield
FILRT provides another useful example. Its first full-year distribution was around P0.404 per share. Its dividend subsequently declined, with historical DPS falling at an average annual rate of about 15.6 percent through 2025.
Its recent trailing distribution of roughly P0.237 represents only about a 3.4-percent yield relative to its P7 IPO price.
But FILRT now trades at around P2.92, almost 58 percent below its IPO price.
At that much lower price, the same distribution produces a yield of roughly 8.1 percent.
DDMPR presents a similar picture. Its distribution has declined slightly, while its share price has fallen from P2.25 to around P1.04. Its recent distribution would provide only about 4.3 percent on its IPO cost but around 9.3 percent at its current price.
The high current yields of FILRT and DDMPR therefore came largely from falling share prices rather than strong dividend growth.
This has happened in overseas REIT markets
The Philippine experience is not unique. In the United States, five listed REITs suspended regular dividends and six reduced them during 2024, according to S&P Global Market Intelligence. Office Properties Income Trust, for example, reduced its quarterly dividend from 25 cents per share to just one cent.
Management cited deteriorating market conditions and the need to preserve liquidity for leasing costs, capital expenditures and debt maturities.
Service Properties Trust also cut its quarterly distribution by 95 percent as it sought to preserve liquidity amid a slow hotel recovery, capital expenditure requirements and deteriorating leverage metrics.
The longer-term numbers are equally revealing. Among 132 US equity REITs examined by S&P Global Market Intelligence, 42 percent paid lower dividends in 2024 than they did before the pandemic in 2019. Office, hotel and some retail REITs were particularly affected by changes in property fundamentals and financing conditions.
But this does not mean high-yield REITs are inherently bad investments.
In the same US market, 76 REITs actually increased their regular dividends during 2024. Nearly 78 percent of retail REITs raised their payouts.
The lesson is not to avoid high yields. It is to understand why the yield is high.
What investors should look for
The eight Philippine REITs show several different combinations.
AREIT, CREIT and RCR increased distributions and now trade above their IPO prices. Their current yields are consequently among the lowest in the sector.
MREIT also increased distributions, although at less than 1 percent annually through 2025. Its share price remains about 14 percent below its IPO price, which has lifted its current yield to about 7.4 percent.
FILRT and DDMPR experienced weaker distributions together with large declines in their share prices.
VREIT and PREIT are perhaps the most interesting cases because their historical distributions had increased even as their share prices declined substantially. The unusually high yields appeared before their previously regular distribution patterns changed in 2026.
For investors, this makes the direction of the share price worth examining together with the dividend.
A high yield produced by rising distributions is very different from a high yield produced by a falling share price, and a high trailing yield is very different from a high yield that can actually be sustained over the next year.
Andrew Ang’s research gives us a useful framework for understanding why.
A high dividend yield can reflect expectations of slower future dividend growth, a higher required return for risk, or some combination of the two.
The recent experience of VREIT and PREIT does not prove that the market predicted their subsequent distribution pattern. But it illustrates how the share price can weaken while historical dividend numbers still look strong.
By the time a dividend actually declines or fails to arrive according to its previous pattern, the share price may already have adjusted.
A high REIT yield should therefore not be viewed simply as additional income. Investors also need to understand what the market may be asking them to accept in exchange for that additional return.
The challenge is determining whether the higher yield is enough to compensate for that risk.
