1 ASX dividend stock down 27% I'd buy right now
The ASX dividend stock Centuria Industrial REIT (ASX: CIP) could be one of the top stocks to buy for passive income right now, thanks to several benefits.
This business describes itself as Australia's largest domestic pure-play industrial real estate investment trust (REIT). It owns a portfolio of high-quality industrial assets that are located in key metropolitan areas.
The ASX dividend stock recently announced its FY26 result, which made it even more compelling.
Higher distribution yield
I'm sure most passive income investors want to know about the potential payouts, so let's start there.
The business increased its payout by 3% in FY26 to 16.8 cents per security, following a 4% rise in funds from operations (FFO) – essentially net rental profit – per unit.
It's expecting to grow its FFO per unit by between 3.3% to 5.5% in FY27, to a range of between 18.8 cents to 19.2 cents per unit. This will help fund the guided distribution of 17.3 cents per unit, which would be a solid year-over-year rise of 3%.
Given that this payout guidance comes at a time of higher interest rates, I think it's especially impressive.
At the time of writing, the likely payout translates into a forward distribution yield of 5.6%. Considering that it's highly competitive with term deposit returns and offers potential for future growth in FY28, I think this ASX dividend stock is a great option for passive income.
Strong rental tailwinds
One of the key reasons I think this REIT is so appealing is its strong rental growth.
There is strong demand for well-located industrial properties due to multiple tailwinds, such as data centres, e-commerce adoption, refrigerated space (for food and medicine), and so on.
The vacancy rate for metropolitan industrial properties is very low due to strong demand, which is driving rental values.
During FY26, the business reported 5.2% like-for-like rental growth, along with 30% positive re-leasing spreads. In other words, new leases are earning 30% more rental income than the old rental rate.
Management also believes the portfolio is, on average, 17% 'under-rented' compared to its potential market rent. As leases come up for renewal over the next several years, there could be a noticeable jump in rental earnings.
Undervalued assets
There are multiple indicators of this business being undervalued.
The most obvious one is to look at the net tangible assets (NTA) of $4.10 – which rose by 2.3% during FY26 – and see that the unit (share) price is trading at a 25% discount to this figure.
Secondly, it's possible the NTA may be understated. During FY26, the business achieved $200 million in divestments at an average premium of 17% to book value, which is reflected in the NTA.
Third, I don't expect interest rates will remain this high forever, so the property values could get a further boost when the RBA does reduce rates, which could possibly happen as early as next year.
When you put all of the above together, I think this is the right time to invest in this ASX dividend stock, though it's not the only name I'm thinking about buying.
The post 1 ASX dividend stock down 27% I'd buy right now appeared first on The Motley Fool Australia.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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