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For investors holding a portfolio primarily composed of Real Estate Investment Trusts (REITs), the appeal is clear: stable rental income, regular dividends, and exposure to the robust real estate sector. However, to truly optimize your portfolio for income and diversification, consider complementing your REITs with a selection of established, dividend-paying Philippine companies outside of the property sector.
Adding dividend champions like Meralco (MER), International Container Terminal Services, Inc. (ICT), San Miguel Food and Beverage, Inc. (FB), DMCI Holdings, Inc. (DMC), and PLDT Inc. (TEL) can offer several key benefits:

* Sectoral Diversification: While REITs offer diversification within real estate, these companies provide exposure to essential services (Meralco), global trade and logistics (ICTSI), consumer staples (SMFB), diversified infrastructure and mining (DMCI), and telecommunications (PLDT). This reduces your portfolio’s concentration risk in a single sector.
* Steady Income Streams: These companies have a long history of profitability and, importantly, a consistent track record of paying dividends, providing another layer of regular income to your portfolio. This can be particularly attractive during periods when real estate yields might fluctuate.
* Potential for Capital Appreciation: Beyond dividends, these established market leaders also offer potential for capital appreciation as their businesses grow and expand.
* Defensive Qualities: Companies involved in utilities (Meralco), consumer staples (SMFB), and telecommunications (PLDT) often exhibit defensive characteristics, meaning their demand is relatively inelastic even during economic downturns, providing a degree of stability to your portfolio.

Let’s delve into each of these potential complementary dividend stocks:

1) Meralco (MER): Powering Your Portfolio
As the largest electricity distributor in the Philippines, Meralco is a classic defensive stock. Its essential service ensures consistent demand, translating into stable revenues and a reliable dividend payout. Investing in MER provides exposure to the country’s growing energy needs and urban development. Its regulated nature often leads to predictable earnings, making it a cornerstone for income-focused investors.

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Investors interested in REITs outside the Philippines can invest in UITFs from Manulife Investment Management of which there are two: Manulife Asia Pacific REIT Fund of Funds and Manulife Global REIT Feeder Fund.

For the Manulife Asia Pacific REIT Fund of Funds, its average annualized dividend yield is 4.71%, with a management fee of 1.75%. For the Manulife Global REIT Feeder Fund, its average annualized dividend yield is 4.55% with the same 1.75% management fee. Note that the above yields are already net of fees.

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The workings of the market has always intrigued me and this is one of those. At its current price, buyers of VREIT will sit on more than 10% dividend yield. That means the market is discounting this REIT, by a lot. But why?

Let’s look at its rental assets: It has 256,000 sqm of GLA made up of 10 community malls and 2 office buildings. It has 97% occupancy rate and has managed to increase its dividends every year since its IPO in 2022. Although no further asset infusions have happened or plans announced, VREIT only has 20% of sponsor Vista Land’s commercial leasing portfolio of 1.6 million sqm so the potential is there.

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Should I give Filinvest REIT (FILRT) a second chance? The stock has lost around -50% of its IPO price and the dividend has dropped -40% over 3 years. But I do love a turnaround story and maybe this could be it. If I buy FILRT shares now, that is a yield of around 7.75% and dividends will be going up with future asset infusions and further rebalancing of their office tenants. In fact, the infusion of Festival Mall recently received SEC approval and will be accretive to 3Q2025 dividends. I also appreciate management’s efforts and commitment towards growing and diversifying the rental assets of the REIT.

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I’ve  just attended the webinar hosted by COL Financial’s April Lee-Tan with Kerwin Tan, director and treasurer of  Robinsons Commercial REIT (RCR). Fortunately COL uploaded it on their Youtube channel so here it is:

I always appreciate companies who reach out to their minority shareholders so kudos to RCR. The first takeaway is the recent announcement that sponsor RLC will be infusing 9 Robinsons Malls this year, subject to shareholder and regulatory approval. Post infusion, RCR’s EBITDA will be approximately 50-50 offices and malls. I think this is great considering the challenges faced by the office sector particularly AI’s impact on the BPO industry. Malls also derive variable rent in the form of a percentage of tenants’ sales so this provides an upside to future dividends, particularly in Q4, when malls are packed with Christmas shoppers.

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