The Scentre Group (ASX: SCG) share price has been a solid real estate investment trust (REIT) for years – but is it the best ASX dividend buy right now?
Why the Scentre Group share price could be good value
While other ASX 200 REITs have been rocketing higher, the Scentre Group share price has been relatively unmoved.
At the time of writing, Scentre Group’s shares are up just 1.29% in 2020 and 2.63% in the last 5 years. However, that’s not necessarily as bad as it seems.
ASX companies like BHP Group Ltd (ASX: BHP) or Afterpay Ltd (ASX: APT) can choose whether to pay a dividend to shareholders or reinvest their profits in further growth. REITs, on the other hand, are required to pay out at least 90% of their profits to their security holders each year.
As a result, the Scentre share price probably isn’t good value if you’re looking for capital growth in 2020. However, the Aussie retail REIT does boast a tidy 4.86% net dividend yield at the moment.
REITs also offer diversification benefits away from the traditional factors affecting equities. Scentre Group owns and operates the Westfield shopping centre chain and therefore has significant exposure to the Aussie retail sector.
Depending on your views on the sector, that may not be such a good thing. However, REITs are a great way to boost your income and invest in property.
The reality is that individual investors couldn’t invest in the same assets that a REIT like Scentre can. Even as the Scentre share price has struggled, the group’s assets under management (AUM) climbed to $54.2 billion in 2019.
Are there other good value REITs to buy?
Scentre Group is far from the only high-yield REIT on the ASX, but I still think it’s not a bad buy. The major risk that I see is a faltering retail sector, which could mean more retailers entering voluntary administration, causing higher tenant turnover and less income for security holders.
Mirvac recently hit a new 52-week high and has been boosted by heavy exposure to residential real estate. National Storage provides good diversification into self-storage REITs, which can help provide non-cyclical holdings in your portfolio.
For more exposure to Australia's biggest companies, here are 3 ASX dividend shares for the right price today.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended National Storage REIT and 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.