1 ASX 200 dividend stock down 20% to buy right now

This beaten-up ASX share could be a top pick for dividends and stability.

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The ASX dividend stock Centuria Industrial REIT (ASX: CIP) has suffered falls of more than 23% since the 2021 peak, as you can see on the chart below. That compares to a more than 5% rise for the S&P/ASX 200 Index (ASX: XJO).

What's going on?

Higher interest rates appear to be impacting the market's sentiment on the business. It's a real estate investment trust (REIT), and Australia's largest domestic pure-play industrial REIT. According to the company, it has a portfolio of high-quality industrial assets situated in metropolitan locations throughout Australia and a "quality and diverse tenant base".

Elevated debt costs are troublesome for REITs because, in theory, higher interest rates generally lower the value of assets like property. REITs also typically have fairly high levels of debt, which is now more expensive to maintain following the RBA interest rate hikes.

Centuria Industrial REIT says it aims for income and capital growth opportunities. There are a couple of elements that make the ASX dividend stock very appealing to me in the current environment after its share price decline.

Quality tenants

As a property business, one of the most important things is who is leasing the buildings. Are they reliable tenants?

When I look at the company's biggest tenants by lease income, I think it's a list of dependable businesses. The biggest five are responsible for 31% of the rental income: Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW), Arnott's, AWH and Visy.

Furthermore, the ASX dividend stock is looking to grow and service the same customers across multiple locations.

Strong rental drivers

The REIT is benefitting from a number of growth drivers for industrial real estate.

Population growth is one of these drivers. According to CBRE Research, around 4.5 square metres of industrial and logistics space is required per person. While the major Australian political parties are talking about trying to limit immigration, Australian net migration is expected to be (one of) the highest among developed nations through to 2030, according to Centuria Industrial REIT.

Another helpful factor for the business is increasing levels of e-commerce adoption. The ASX dividend stock highlights that the COVID-19 pandemic accelerated e-commerce adoption. E-commerce spending is currently 12.8% of total retail spend, which is expected to grow to around 15% by 2027.

A third positive for Centuria Industrial REIT is increased onshoring of production and assembly to mitigate the supply issues seen as a result of the pandemic, and geopolitical and trade tensions, which increased shipping time and costs. This change should help drive further demand for industrial property.

According to Centuria, industrial property demand is forecast to exceed uncommitted new supply through to 2026. The strong demand and low vacancy rate is helping drive the business' rental income growth.

Big discount and solid dividend yield

Centuria Industrial REIT regularly releases a net asset value (NAV) figure, which tells us what its property portfolio and other assets and liabilities are worth as an overall dollar amount.

During this period of high interest rates, it may be worth being more cautious around REIT NAVs, but I like the discount that this ASX dividend stock is trading at.

The company said its NAV was $3.89 as at 31 December 2023, so the current Centuria Industrial REIT share price is trading at a 17% discount to this.

It's expecting to pay an FY24 annual distribution of 16 cents per unit, translating into a distribution yield of 4.9%, which I think is solid.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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