I'd buy 9,600 shares of this ASX 200 stock to aim for $200 a month of passive income

Want regular income? This could be a great stock to buy.

| More on:
A couple lying down and laughing, symbolising passive income.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The S&P/ASX 200 Index (ASX: XJO) stock Charter Hall Long WALE REIT (ASX: CLW) could be a very effective choice for passive income.

It's a real estate investment trust (REIT) that owns a diversified portfolio of commercial properties including hotels and pubs, government-tenanted offices, data centres and telecommunications, service stations, grocery and distribution and plenty more.

Over the years, it has expanded its portfolio both in size by expanding into new subsectors, boosting its diversification and broadening its search zone for opportunities.

As a REIT, it's attractive because its tenants are signed on for long leases. The business has a long weighted average lease expiry (WALE) of around a decade, hence the name of the business.

The ASX 200 stock's rental income is regularly growing thanks to both fixed annual rental increases and inflation-linked rental increases.

While higher interest rates have been a headwind in recent years, the RBA rate cuts could help both rental profits and property valuations.

How to make $200 a month of passive income

Pleasingly, the business pays a distribution every three months. But, to reach a monthly target, we'll need to think of the business with an annual target in mind.

To make $200 per month, we're talking about an annual goal of $2,400 per month.

The business has guided that it expects to pay an annual distribution per unit of 25 cents. At the current Charter Hall Long WALE REIT unit price, that translates into a distribution yield of 5.9%.

If we owned 9,600 units of this ASX 200 stock, we'd receive $2,400 of annual passive income, based on the projected payout.

The projection on Commsec suggests the business could increase its annual payout by 3.2% to 25.8 cents per unit in FY26. That translates into a forward distribution yield of 6.1%. Owning 9,600 units would translate into a distribution of $2,476.80 cash for an investor.

A great time to invest in the ASX 200 stock

With the RBA cutting the cash rate, and expectations for more cuts in the next 12 months, I think this is a great time to consider the business. It offers a good yield, its interest costs could reduce and property valuations could rise.

Charter Hall Long WALE REIT units are currently trading at an 8.5% discount to its net tangible assets (NTA) as of 31 December 2024.

In my view, this could be a very effective investment for passive income and it's still a good time to invest.

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.

More on Dividend Investing

Happy young couple saving money in piggy bank.
Dividend Investing

Buy these strong ASX dividend stocks for passive income

Brokers rate these shares as buys for passive income.

Read more »

A man thinks very carefully about his money and investments.
Dividend Investing

Buy Fortescue and these fantastic ASX dividend shares with $5,000

These shares have been named by brokers as buys for income investors. Let's see what they offer.

Read more »

an older woman holds a handful of paper money in her hands and looks at them with a slightly crazy smile on her face wearing her spectacles on a string as a lot of older people do.
Dividend Investing

I rate these 2 high-yield ASX dividend stock as buys

These businesses could pay big passive income.

Read more »

Woman and man calculating a dividend yield.
Dividend Investing

With the 13% dividend yield, is the GQG share price a buy?

This stock has a huge dividend yield. Does it offer more than that?

Read more »

an older couple look happy as they sit at a laptop computer in their home.
Dividend Investing

Forget term deposits and buy these ASX dividend stocks

Analysts think these shares could be top alternatives to term deposits.

Read more »

A young boy points and smiles as he eats fried chicken.
Dividend Investing

1 ASX dividend stock down 41% I'd buy right now

This stock could produce some tasty returns.

Read more »

Excited couple celebrating success while looking at smartphone.
Dividend Investing

2 fantastic ASX dividend shares to buy while they are cheap

Let's see why brokers think these shares are buys for income investors.

Read more »

A mature woman holds a plate of cake and licks her thumb.
Dividend Investing

Want a 5% yield from US stocks like Amazon? Buy this ASX dividend share

It's possible to have your cake and eat it too.

Read more »