The ASX stock Charter Hall Retail REIT (ASX: CQR) could be an underrated buy in the current investment environment for passive income.
At a time when many businesses are seen as overvalued, this real estate investment trust (REIT) could provide investors with a mixture of defensive earnings and sizeable distributions.
The Charter Hall Retail REIT owns a portfolio of shopping centres across Australia and there are a few positives going for the business, whereas it has faced negatives in the last few years of high interest rates.
Let's take a look at how the ASX stock could deliver solid passive income.
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$100 of passive income per month
The Charter Hall Retail REIT doesn't pay a distribution every single month, so it's better to think of the goal as an annual target and then divide that by 12.
The ASX stock expects to pay a FY26 distribution per unit of 25.4. cents, which translates into a forward distribution yield of 6%, at the time of writing.
For $100 of monthly income, we're talking about $1,200 of annual passive income. To reach that goal in FY26, investors would need to own 4,725 shares (units).
The guided FY26 payout is expected to be 2.8% higher than the 2025 financial year figure. This will be funded by forecast 3.5% growth of the operating earnings to 26.3 cents per share. Therefore, the distribution payout ratio is expected to be 96.6% of operating earnings, which is high but sustainable.
Why this is a good time to invest in the ASX stock
The Charter Hall Retail REIT is benefiting from the RBA cash rate cuts.
A lower cash rate can translate into lower debt costs for the business, which should help push earnings and the passive distribution income higher.
Rate cuts can also push the property valuations higher. Higher real estate prices are the strongest driver of the Charter Hall Retail REIT share price over the longer-term.
The ASX stock can also benefit from a stronger retail environment. The business had a portfolio occupancy of 98.9% in FY25, decent sales growth for its tenants and reported mid-single digit rental growth of newly-signed leases, the strongest it has seen in more than a decade.
I think it looks like good value because it's trading at a sizeable discount to its net tangible assets (NTA) per unit of $4.64 at June 2025 (which increased 2.9% year over year). That means it's trading at a discount of 9% to the NTA, which I think is appealing.
