Certain ASX dividend shares could be great buys for income-seekers who are focused on the long term and have $2,000 to invest.
Dividends paid in the next couple of years are important, but those over the next five years or ten years become even more significant.
Now, I don't want to buy and sell ASX dividend shares every year. My preferred holding period for an ASX share is at least 10 years.
While the current yields of the stocks below are already appealing, I think they could see significant growth over the next ten years.
Centuria Industrial REIT (ASX: CIP)
This is the largest pure-play Australian industrial real estate investment trust (REIT) with a portfolio of properties across Australian cities. At the end of FY24, its portfolio was worth approximately $3.9 billion
Higher interest rates are a headwind for commercial property because they lower valuation and increase the cost of debt. The Centuria Industrial REIT share price has been down around 25% since December 2021.
At the current Centuria Industrial REIT share price, it's trading at a discount of around 20% to the June 2024 net tangible assets (NTA) of $3.87.
In FY25, the business expects to pay a distribution of 16.3 cents per unit, which translates into a distribution yield of 5.25%.
Because of the rental increases the ASX dividend share is achieving, I think there is plenty of exciting rental profit growth and distribution to come. In FY24, it achieved 43% positive re-leasing spreads, meaning the new rental contracts are seeing significantly more rental income than the old contracts. Around 39% of portfolio leases expire by FY28, providing a significant tailwind in the next four years.
With a 7.6-year weighted average lease expiry (WALE) and 97% portfolio occupancy, the prospects for passive income for the rest of this decade are compelling.
Jesse Curtis, Centuria's head of funds management, explained why rental income was performing so well:
The domestic industrial real estate market continues to exhibit strong tailwinds, driven by rising e-commerce adoption, a growing population, and a trend towards onshoring supply chains in the wake of global supply chain uncertainty.
CIP aims to capitalise on these market and macroeconomic trends to benefit its unitholders.
Step One Clothing Ltd (ASX: STP)
Step One is also benefiting from e-commerce adoption. It's a direct-to-consumer online retailer of underwear. The company markets these products as "organically grown and certified, sustainable, and ethically manufactured".
Step One has been paying almost all of its profit to shareholders as a dividend. The dividend payout ratio may not always be as high, but I believe the payout can continue growing if the net profit rises.
In FY24, the ASX dividend share grew its net profit by 43.9% to $12.4 million, following a 29.7% rise in revenue. Those growth numbers show that the business can deliver pleasing operating leverage where profit rises faster than revenue.
Looking across its markets, Australian revenue rose 18.3% to $50.9 million, United Kingdom revenue increased 33.2% to $27.1 million, and United States revenue jumped 261% to $6.5 million. Step One is focused on these three markets (for now), but I think there's plenty of scope to grow into places like Canada.
In FY25, Step One is looking to expand its range, win new customers, sell more through retailers like Amazon and John Lewis, and improve the customer experience.
Its FY24 grossed-up dividend yield is currently 5.4%. In five years, I believe the annual dividend could be much larger.
