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Are Scentre shares a top buy for ASX income?

Unlike many other REITs (Real Estate Investment Trusts), the Scentre Group (ASX: SCG) share price hasn’t gone ballistic in 2019 so far. Today, Scentre Group shares are sitting at about $3.97 (at the time of writing), which isn’t too far from the 2019 opening price of $3.84 but right in the middle of the 52-week high of $4.19 and the 52-week low of $3.63. So is this a Goldilocks moment to buy Scentre shares? Let’s have a look at Scentre.

What does Scentre Group do?

Scentre has a rather fascinating history. It is the Australian and New Zealand arm of what used to be Westfield Group – run by the famous Lowy family. Until its dissolution in 2014, Westfield Group was one of the biggest ASX success stories and Scentre continues its Australian legacy with its ownership of the Westfield centres across Australia and New Zealand. Westfield Group had a global network of shopping centres across the US, UK and Europe as well, but these assets were spun-off separately into Unibail-Rodamco-Westfield (ASX:URW) when Westfield Group was dissolved.

Many investors are sceptical of REITs that operate in the physical retail space due to the rise of Amazon and online shopping over the last decade (and understandably so). One only has to look at the share price of companies like Myer Holdings Ltd (ASX: MYR) to understand the dangers that ‘traditional retail’ is facing. But Scentre saw the writing on the wall, and have been repositioning their shopping centres as ‘living centres’, with more focus on lifestyle, eating and experiences like cinemas over conventional shops. In my opinion, this has been a reasonably successful strategy and in its most recent earnings report, Scentre reported an occupancy rate of 99.3%.

Is Scentre a buy for income? A Foolish takeaway

The company has a comforting history of increasing its distributions every year since inception and Scentre has recently increased its distribution payout again to 11.3 cents, giving Scentre shares a trailing annual yield of 5.64% on today’s prices. Considering this beats the starting yield of many ‘typical’ dividend stocks like Commonwealth Bank of Australia (ASX: CBA) today, I think Scentre is an attractive dividend option to consider for income.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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