The S&P/ASX 200 Index (ASX: XJO) stock Centuria Industrial REIT (ASX: CIP) looks to me like one of the best ASX dividend shares to buy for passive income. I'm excited by the potential of the business in the next few years for income investors.
If you're wondering what this business does, it is Australia's largest domestic pure play industrial real estate investment trust (REIT). It has a portfolio of high-quality properties across key metropolitan locations throughout Australia, with a quality and diverse tenant base.
Pleasingly, the business is benefiting from limited vacancy, low levels of forward supply of industrial space and strong annual rental demand. There is good demand in areas like e-commerce growth, data centre growth, refrigerated space (food and medicine) and others.
In the first nine months of FY25, the business reported it had secured lease terms for 102,000 square metres and achieved positive re-leasing spreads of 41%. That means the business is now receiving 41% more rental income on the new lease than the old lease. That's a strong driver for future rental profits and the passive distribution income.
I'm also optimistic that the ASX 200 stock can benefit from lower interest rates, which could help both rental profits and profit valuations.
How to make $300 a month of passive income
The business pays a distribution every three months, which is a pleasingly regular payment of cash flow. To reach a monthly target, I think it'd be best to think about an annual target and then divide that into 12 equal amounts.
Reaching $300 per month translates into an annual goal of $3,600.
The ASX 200 stock has guided that it will pay an annual distribution per unit of 16.3 cents per unit in FY25. At the current Centuria Industrial REIT unit price, that translates into a distribution yield of 5.2%.
If we owned 22,086 units of Centuria Industrial REIT, we'd receive $3,600 of annual passive income, based on the projected payout.
The forecast on Commsec currently suggests the business could grow the annual payout to 16.5 cents per security in FY26, which translates into a future distribution yield of 5.25% and would mean the total payout could be $3,644.
A great time to invest in the ASX 200 stock
The RBA has already cut the official cash rate twice and some market commentators think there could be another three or four cuts in the next 12 months. I think this is a great time to think about investing the business – rate cuts could a very strong tailwind.
The Centuria Industrial REIT unit price is currently trading at a 19% discount to its net tangible assets (NTA) as of 31 December 2024. That large of a discount looks too good miss for income investors.
