1 ASX dividend stock down 50% I'd buy right now

I think owning this business can help Aussies who are building wealth.

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I'm calling the ASX dividend stock Centuria Capital Group (ASX: CNI) a compelling opportunity to buy right now.

As shown on the chart above, the Centuria share price has dropped by approximately 50% since mid-September 2021 and 15% since 27 September 2024.

I'm not suggesting the commercial property fund manager is a buy simply because it has fallen in value, but that definitely helps. Three factors make me believe this ASX dividend stock is an appealing investment right now, which I'll outline below.

Interest rate rebound?

It's clear to me that the Centuria share price has suffered from a significant rise in interest rates in Australia since 2022. Higher rates theoretically push down on the valuations of assets such as commercial property. There is a double whammy because property businesses usually have debt, which is now much more expensive than it was three years ago.

But, the opposite could happen when/if the Reserve Bank of Australia (RBA) cuts rates. When a cut happens is anyone's guess though, with one economist suggesting a rate cut could be as much as a year away.

Seeing interest rates reduce could help Centuria in a number of ways. It could increase the value of the properties it owns and manages, it could encourage investors to give Centuria more money to manage, and it could reduce the cost of the company's debt.

Significant value on offer

In my view, there are a few appealing elements about the business, with its management and property assets undervalued.

In FY24, the ASX dividend stock generated operating earnings per security (EPS) of 11.7 cents. That puts the current Centuria share price at less than 16x FY24's operating earnings. It's trading at less than 13x FY23's operating earnings. It expects to grow operating EPS to 12 cents per security in FY25.

The business has significant investments where it's co-invested alongside other investors. Two of its biggest assets are holdings of real estate investment trusts (REITs), of which it is the manager. Those REITs are Centuria Industrial REIT (ASX: CIP) and Centuria Office REIT (ASX: COF), both of which could themselves be undervalued investments right now, in my opinion.

Centuria reported it had a net asset value (NAV) per security of $1.79 at the end of FY24, though a significant portion of this related to intangible assets.

Passive income

The ASX dividend stock is an appealing option for passive income because it pays a significant portion of its operating earnings out as a distribution.

In FY25, it's expecting to pay a distribution of 10.4 cents per security (4% higher than FY24), representing a healthy distribution payout ratio of 86.7%. This would be an FY25 distribution yield of 5.7%.

I think that's a great starting yield for the ASX dividend stock, with more growth likely in the coming years.

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 no position in any of the stocks mentioned. 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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