It’s a real estate investment trust (REIT) that owns a large portfolio of properties.
Whilst it isn’t the biggest REIT on the ASX, it is building a reputation as being one of the most dependable for dividends. It’s rated as a buy by a few different brokers, including Citi. Here are some of the reasons why it’s attractive:
It has a property portfolio that is now worth $7 billion, which the business describes as high-quality and diversified. There are 549 properties, with 79% of them located on the eastern seaboard of Australia.
The portfolio is diversified across different sectors including agri-logistics (4%), social infrastructure (13%), office (19%), industrial and logistics (21%), hospitality (22%), convenience retail (11%), and ‘diversified long [weighted average lease expiry] WALE retail’ (9%).
Nearly all of the tenants are blue chip tenants – 99% are either government, ASX-listed, multinational, or national. Some examples include the Australian government, Telstra Corporation Ltd (ASX: TLS), BP, and Endeavour Group Ltd (ASX: EDV).
The ASX dividend share is expecting to pay a distribution of at least 30.5 cents per security. Charter Hall Long WALE REIT typically pays a distribution of 100% of operating earnings.
Assuming a payout of 30.5 cents, that translates to a current distribution yield of 6.1% at the current Charter Hall Long WALE REIT share price.
Morgan Stanley, one of the brokers that rates the business as a buy (with a price target of $5.85), thinks that the REIT will pay a distribution of 6.4% in FY23.
Reliability and organic growth
The REIT is proud of its income security. It has a portfolio weighted average lease expiry (WALE) of 12.2 years. Management says that this provides insulation from market shocks. It also gives investors a lot of visibility and security about the rent.
Rental income growth is driven by annual rent increases in all leases. Around 46% of leases are linked to CPI with a 3.3% weighted average increase in the first half of FY22. The other 54% of leases have fixed increases, with an average fixed increase of 3.1%.
This has allowed the business to continue growing the distribution per security by an average of 3.7% per annum since it listed several years ago.
In FY22 it’s expecting to grow the distribution by at least 4.5%, adding to the ongoing growth.
Charter Hall Long WALE REIT share price valuation
At the time of writing, the REIT’s share price is at $5.01. That compared to the net tangible assets (NTA) of $5.89 at 31 December 2021. That implies a discount of around 15%.