It could be a great time to invest in certain ASX dividend shares that are trading on attractively low valuations.
Both of the businesses I'll discuss here come from the real estate investment trust (REIT) sector, which has seen profitability and valuation pain amid high interest rates.
There is a limited supply of quality land in Australia, which I think will be worth significantly more in a decade than it is today. With a potential rate cut getting closer, the below stocks could be great investments for income investors right now.
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Rural Funds Group (ASX: RFF)
This REIT gives investors exposure to different types of farmland. Rural Funds owns cattle, vineyards, almonds, macadamias, and cropping farms — leasing them to high-quality tenants.
I believe this ASX dividend stock owns appealing assets that can provide a mixture of income in the short term and growth over the long term. Some farm types, such as poultry, are known for generating a higher rental yield but not achieving rental growth. That lack of growth is why Rural Funds decided to divest its poultry assets a few years ago.
Rural Funds is achieving organic rental income growth because most of its lease contracts contain fixed annual increases or increases linked to CPI inflation. As a stockholder, I believe this rental growth can help boost my wealth and offset the impacts of inflation in the long term.
Rural Funds is expecting to pay an annual distribution of 11.73 cents per unit in FY25, which translates into a distribution yield of 7%. The distribution could also rise noticeably over the next decade thanks to the rental growth and perhaps rate cuts.
Charter Hall Long WALE REIT (ASX: CLW)
This ASX dividend share is also an ASX REIT. Its property portfolio is spread across a range of sub-sectors including service stations, telecommunications exchanges, offices leased to government entities, high-quality retail buildings, and logistics and distribution warehouses.
One of the main advantages of this business as a passive income play is that the REIT has a weighted average lease expiry (WALE) of approximately 10 years. Even if it didn't sign any new leases in the next decade, it has already locked in a lot of future rental income.
It is also benefitting from rental growth comprising both fixed rental increases and inflation-linked rental increases. Rental growth could help boost the distribution in the coming years, particularly if interest rates are reduced.
With the Charter Hall Long WALE REIT exposed to so many property sectors, I believe it can find the best opportunities in the real estate industry for both rental income and growth.
The ASX dividend share expects to pay a distribution of 25 cents per unit in FY25, which translates into a distribution yield of 6.6%. That's a great starting distribution yield, in my opinion.
