ASX dividend stocks that have fallen significantly significantly from their peak can offer big opportunities. Not only do they offer large dividend yields, but they may also be undervalued. I think that definitely describes the situation with Growthpoint Properties Australia Ltd (ASX: GOZ).
Growthpoint says that it invests in high-quality Australian real estate. It directly owns a portfolio of office and industrial properties, while managing a portfolio of office, industrial, logistics and retail assets for third-party wholesale syndicates and institutional investors through its funds management business.
As the chart below shows, the Growthpoint Properties Australia share price is down 46% since April 2022.
At the current valuation, I think this is an excellent time to invest in the business for a few different reasons.
Image source: Getty Images
Large dividend yield
Management has guided for FY25 distribution of 20.3 cents per security. This comprises a forecast 18.2 cents per security and a 2.1 cents per security one-off distribution.
Using just the 18.2 cents payout, the business has a FY25 distribution yield of 7.6%, which I'd call a strong yield.
I think there's a good chance the ASX dividend stock can grow its distributions in the coming years thanks to a mixture of RBA cuts and potential operating earnings growth.
RBA rate cuts
The Reserve Bank of Australia (RBA) has already cut the cash rate twice in Australia this year and I'm expecting more rate cuts in the coming months. The recent increase in the unemployment rate from 4.1% to 4.3% makes a rate cut in August more likely, in my view.
Rate cuts could reduce interest costs for the ASX dividend stock, which could help the rental profits and overall profitability.
But, the interest rate cuts could also improve the valuations of the properties, which I think would be very supportive for the Growthpoint Properties Australia share price.
Solid operating performance
In the FY25 half-year result, the business reported its direct portfolio had an occupancy rate of 94%, with a weighted average lease expiry (WALE) of six years. This reflects solid rental metrics for the business, which should allow it to generate a good level of rental income from its portfolio for a number of years.
When the ASX dividend stock announced its HY25 result, the Growthpoint CEO and managing director Ross Lees said:
Through our strategy of focusing on portfolio performance, growth with like-minded partners, efficient allocation of capital and sustainable future proofing, our exceptional people will continue to focus on our tenant advantage. We will seek to enhance our capital position, source and execute fund and capital partnerships, and build scale in our existing asset classes.
Australia's population is expected to grow by over 4 million people by 2034 , and we expect this to be a key driver of demand across our owned and managed portfolios, from office, to industrial and to retail. On 18 February 2025, the RBA announced a 25 basis point rate cut, the first change since November 2023. We expect that this will increase confidence across real estate and improve capital flows to the sector. In turn, we believe this will provide investment and capital recycling opportunities against a backdrop of constrained supply.
That's very promising commentary, in my view.
Big asset discount
The business is trading at a pleasing price compared to what its underlying value is reported to be.
For its FY25 half-year result, it included some independent property valuations, which I think gives more legitimacy to what the business is suggesting its properties are worth.
At 31 December 2024, the ASX dividend stock reported it had net tangible assets (NTA) of $3.21. That means the business is currently valued at a discount of more 25%, which is a large and attractive discount.
With RBA cuts expected, I think this business is an attractive opportunity for both income and potential capital gains.
