The ASX dividend stock Centuria Industrial REIT (ASX: CIP) is significantly below its previous all-time high, as the chart below shows. It has dropped 25% from December 2021, making it a much more appealing investment.
For investors that haven't heard of this business, it's the largest domestic pure play industrial REIT. Its portfolio of "high-quality industrial assets" is situated in key metropolitan locations throughout Australia and is underpinned by a quality and diverse tenant base.
As explained below, I believe one of the key reasons to like this ASX dividend stock is its high-quality tenant base.
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Strong tenant base
The REIT says that it offers secure income, with 93% of its rental income backed by blue-chip tenant customers.
Its tenants are from a diverse array of sectors, which I think provides good diversification.
Some of its tenants include Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW), Arnott's, AWH, Visy, Fantastic Furniture, Amazon, Yamaha and Australia Post.
This helps provide reliable income and allows it to deliver strong rental profits and distributions.
It also has these tenants on long-term rental contracts, it had a weighted average lease expiry (WALE) of 7.3 years at the end of the FY25 half-year result.
Solid passive income potential
There is strong demand for industrial properties in Australia's capital cities, which is helping drive rental income, a high level of occupancy and funding pleasing distributions.
The ASX dividend stock expects to pay a distribution of 16.3 cents per security in FY25, which translates into a distribution yield of 5.2%. That's a much more attractive yield to me than term deposits (particularly if the RBA is going to cut rates further).
Centuria Industrial REIT is seeing strong rental growth. In the FY25 third quarter, it reported positive re-leasing spreads of 41% in the financial year to date. Meaning, the newly-agreed rental contracts are delivering 41% higher rental income than the old leases.
That rental demand, boosted by trends like e-commerce and data centres, should help fund larger distributions in the coming years.
Attractive valuation discount
Every six months, the business tells investors what its underlying value is. This includes the property valuations, the loans and everything else.
The ASX dividend stock reported it had net tangible assets (NTA) of $3.89 at 31 December 2024. That means it's currently trading at a discount of almost 20% to its underlying value, so it looks like great value to me, which is part of the reason why the distribution yield is as high as it is.
