SINGAPORE (Dec 25): The US Federal Reserve is widely expected to raise the benchmark federal funds rate three times next year, with a median projection for a rate of 2.1% by end-2018. As interest rates rise, investors can expect to see some downward pressure on the market values of real estate investment trusts (REITs) and other yield instruments. That is because the market will demand increased compensation for the additional risk.
Some of the highest-yielding counters, however, are already trading at a substantial discount. Their values have mostly fallen over the course of the year, on the back of weaker earnings or an uncertain outlook. And there may be some opportunities for investors to pick up a bargain.
The counter with the highest yield is Asian Pay Television Trust, with an 11.21% trailing 12-month dividend yield. APTT booked a 7.7% y-o-y increase in revenue for 3QFY2017 ended Sept 30, to $84.5 million. However, its free cash flow for the quarter was just $20 million. This is below the $23.3 million needed every quarter to pay the 1.625 cents in distribution per unit. APTT’s cash flow comes mostly from monthly cable TV subscription fees. It owns the third-largest cable operator in Taiwan.