I think both of the ASX income shares I'm going to tell you about are compelling options for the payouts.
The last year or two has seen interest rates soar and some asset prices drop. I get excited when share prices drop for ASX dividend shares because it has the effect of pushing the yield upwards. For example, if a business with a 5% dividend yield suffers a 10% share price drop, the yield becomes 5.5%.
Bigger falls cause larger increases to the yield, assuming the payout isn't reduced by the business (in dollar terms).
Centuria Industrial REIT (ASX: CIP)
Logistics are an essential part of any business that deals with physical products. This business is a real estate investment trust (REIT), it owns industrial properties across Australia.
The COVID-19 period ignited a lot of demand for industrial warehouses in Australia, which is helping the ASX income share because nearly all of its properties are tenanted and the (organic) rental growth is stronger.
In the update for the three months to 30 September 2023, the occupancy rate for the REIT was 98.6% with a weighted average lease expiry (WALE) of 7.8 years. In the first quarter of FY24, it reported a positive re-leasing spread of 48%, which is a lot more rental income compared to the old lease rate.
Businesses will still need their warehouse in a downturn, I think its rental earnings could be very defensive because of the long-term rental agreements.
It's expecting to pay a distribution of 16 cents per unit in FY24, which translates into a distribution yield of 5.1%. The Centuria Industrial REIT share price is 25% lower than 31 December 2021.
APA Group (ASX: APA)
APA is a large energy infrastructure owner. This ASX income share owns a national network of gas pipelines, transporting half of the nation's gas usage – I think this fact means the business has defensive earnings. We all need energy, households and businesses alike.
It also owns assets across gas storage, gas processing, gas-powered energy generation, electricity transmission and renewable energy generation.
The business has grown its annual distribution every year since 2004, which is one of the longest-running consecutive growth streaks on the ASX.
It pays for the distribution from its cash flow, which is growing thanks to inflation-linked revenue and regularly completing the construction of another pipeline or acquisition of another electricity-related asset.
The defensive ASX income share is expecting to pay a distribution per security of 56 cents, which is a forward distribution yield of 6.8%. The APA share price is down 31% from August 2022.
