What is as important as high returns in any form of investment? Two words: Consistency and predictability.

Sometimes, when some of my clients lament that their return of 10% to 12% a year is not high enough, I share with them that there are a lot of other options to get higher returns in a shorter time. It could be in properties (especially in Penang, KL or Iskandar Malaysia), in warrants and in Casino de Genting.

Their eyes will then bulge in surprise - an advisor asking me to go to a casino to get higher return?

Well, yes, if high returns within shortest time is what you are looking for. Of course that comes with a high probability of losing your capital in a wink or in a throw of a dice. But a wise man (I believe you are if you are reading this) will only allocate no more than 5% or 10% percent of his total assets to dabble in speculative “investments” - just for the kick of it.

And in case you are wondering why direct property investments can be speculative, it all depends on how you “play it”. Investing for rental yield is not speculative, but flipping properties using DIBS is. That is why Bank Negara is now studying the risks of DIBS and would potentially impose steps to curb this as we speak.

Anyway, I digress.

The fact is, predictability is what REIT stocks offer. Some might say it is boring, but being boring is really not a bad thing when we put it into this perspective: consistent income stream.

I would look at dividends as the cake itself, while capital gain is the icing on the cake. Stock prices are affected by market sentiment - we cannot control that; but in sectors like REIT, dividend payout is one of the yardsticks investors should use to gauge a REIT stock's long term potential.

We can study the past performances of established REITs over the years (take Axis REIT as an example) and notice one distinctive trend. While the DPS (dividends per share) of many dividend-paying companies (even bluechips like Maybank) were affected post-2008 recession, DPS of many Malaysia REITs remained unscathed. In fact, it is increasing, which speaks volume about the competency of the manager and defensiveness of REIT assets. All types of business experience problems financially or organisationally but it is the way with which its administrative team copes with it that counts.

Slide from Axis REIT's 4Q 2012 presentation

So no matter which REITs or which stock market you are invested in, always look for increasing, or at least, non-decreasing dividend payouts y.o.y (year over year). If you are the landlord, there is no reason you should decrease your rent. There is only one direction rents are heading - and that is up. If it is not, then there is something fundamentally wrong with the property in the first place.

The second important point to note is the growth of these assets, which is a huge contributing factor to the consistently increasing dividends payout. Growth could be organic or inorganic.

Organic growth refers to increased rental income from existing tenants (when lease tenancies are renewed) and asset enhancement initiatives (abbreviated AEI) by the REIT manager. For instance, the manager of a retail REIT may convert a previously unutilized space in a mall to shop lots which generate rental income. Or, the retail REIT Manager may refurbish its properties so it could attract more quality tenants and bigger crowds which translates to brisk business/better sales to for it tenants. This, in turn, will generate more revenue as well.

The inorganic growth part means the manager is acquiring yield accretive external assets to be injected into his portfolio under management. This is a topic by itself, which I am going to share in future articles.

Since REIT is a property-related investment, the mantra - “Location, location,location” still applies. However, this is one of the things investors should be least worried about because REIT managers are known to be competent in picking properties in prime locations for their business. For example, you know that an office REIT like AmFIRST would consist of office buildings in central business districts. Similarly, a retail focused REIT like Capita Malls Malaysia Trust would have assets in good catchment areas, while it is good to know that Axis REIT is expanding its portfolio in booming industrial parks at Batu Kawan Penang and Iskandar Malaysia. Of course it is an investor’s responsibility to do due diligence and keep up to date with news regarding the companies he is invested in.

A young,  novice stock investor is likely to be easily spooked if he just started investing at the onset of market crash, so my take is, start small with REITs. You will be delighted to see dividend vouchers coming your way two or four times a year while you sleep. For retirees, you would have affinity towards income-generating assets. In that case, REIT also fits the bill well.

Lieu Ching Foo is the founder of Malaysian personal finance blog http://HowToFinanceMoney.com, the co-founder of REITMethod.com and an advisor with financial advisory firm Fin Freedom.