At a time when the Reserve Bank of Australia (RBA) is cutting interest rates, I think there are some ASX dividend stocks that look like excellent buys right now.
Real estate investment trusts (REITs) were some of the hardest hit businesses from the high interest rates. It hurt their rental profits (with higher debt costs) and impacted property valuations.
Those headwinds are turning into tailwinds, in my view. With multiple cuts predicted for the next 12 months, I think multiple REITs look like excellent buys. I'll tell you about two of my favourite ideas in the sector.
Centuria Industrial REIT (ASX: CIP)
This REIT is the largest listed pure-play option on the ASX to gain access to the industrial property segment of the market.
It owns 87 assets, which have a stated value of $3.8 billion. Its also has a portfolio occupancy rate of 96.6% and a portfolio weighted average lease expiry (WALE) of 7.3 years. Those are pleasing portfolio metrics, in my view.
The business is generating solid rental growth, thanks to the strong demand for warehouses in well-located areas. In the first half of FY25, the ASX dividend stock reported funds from operations (FFO) – rental profit – growth of 4.6%. That was achieved, despite finance costs rising by 11.5%.
With the business benefiting from several tailwinds, including e-commerce growth and data centres, I think its rental profit has a very compelling future.
It's currently trading at a 20% discount to its net tangible assets (NTA) of $3.89 as of 31 December 2024. This large discount means it now offers a FY25 distribution yield of 5.2%.
Rural Funds Group (ASX: RFF)
Rural Funds is the other REIT ASX dividend stock I want to highlight as an underlying opportunity in June.
It owns farmland around Australia in different climatic conditions and various farming sub-sectors. Its major exposures include almonds, cattle, macadamias and vineyards.
Farms have been an important asset for thousands of years and I think farmland will continue to be important for many years to come.
Rural Funds has a number of tenants that are listed businesses around the world, so the rental income is very reliable. The farms have annual rental increases that are fixed, or linked to inflation, plus market reviews. I believe there is good potential for ongoing rental profit growth in the coming years. That assumes interest rates stay stable (or reduce further).
The business is expecting to pay a cash distribution of 11.73 cents per unit in FY26. That translates into a forward distribution yield of 6.5%.
