The ASX dividend stock Charter Hall Long WALE REIT (ASX: CLW) is a real estate investment trust (REIT) which has a lot of appealing characteristics.
When a share price falls, it significantly boosts the dividend yield. For example, if a business has a dividend yield of 6% and the share price falls 10%, then the dividend yield becomes 6.6%. If it drops 20%, then the yield will be 7.2%.
There are plenty of REITs on the ASX that specialise in specific areas such as retail, industrial, or office. Charter Hall Long WALE REIT is invested in a variety of different property subsectors, including pubs and bottle shops, data centres and telecommunications, service stations, grocery and distribution, food manufacturing, waste and recycling management, and more.
Looking at the ASX dividend stock, there are a few factors that appeal to me, which I'll get into below.
As the name suggests, the business aims to have a long weighted average lease expiry (WALE). That means that when you look at all the contracts the REIT has, the average lease is locked in for the long term.
At 31 December 2024, the ASX dividend stock has a WALE of 9.7 years. That means the average tenant is locked in for approximately a decade.
There are a number of high-quality tenants on the books of the Charter Hall Long WALE REIT.
As at 31 December 2024, there are eight tenants that pay at least 3% of the REIT's rental income. That includes Endeavour Group Ltd (ASX: EDV) (22% of the rent), Australian federal and state government entities (19%), Telstra Group Ltd (ASX: TLS) (13%), BP (12%), Metcash Ltd (ASX: MTS) (5%), Coles Group Ltd (ASX: COL) (5%), David Jones (5%), Arnott's Group (3%), and Bunnings (3% – part of the Wesfarmers Ltd (ASX: WES) business).
While higher interest rates are a headwind for the business, its rental income growth is helping offset that. When interest rates eventually fall, I think the business' rental profitability can significantly increase.
In the first six months of its FY25 result, it reported 3.5% like-for-like net property income growth, underpinned by 54% of lease rent reviews being linked to CPI inflation, with the rest being fixed growth reviews.
With a diversified portfolio, I think this is a solid growth rate, helped by its 99.8% occupancy rate.
The rental income growth can help increase the rental profitability in the coming years.
The business aims to pay 100% of its operating earnings per security (EPS) as a distribution each period, which enables a higher yield from the ASX dividend stock.
Charter Hall Long WALE REIT is expecting to pay a distribution of 25 cents per security in FY25, which translates into a distribution yield of 6.5%.
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