The Charter Hall Long WALE REIT (ASX: CLW) is an oversold ASX stock that looks too cheap for how much passive income potential it has in the coming years and decades.
As the above chart shows, the business is still around 20% lower than it was in the first half of 2022 before the RBA cash rate cuts. I think it's still a good time to invest in the business.
It's a real estate investment trust (REIT), but to me it's arguably the most attractive REIT that we can invest in.
There are plenty of REITs that are only focused on one or two areas of the commercial property sector, such as Goodman Group (ASX: GMG), Charter Hall Retail REIT (ASX: CQR), Scentre Group (ASX: SCG) and GPT Group (ASX: GPT).
Charter Hall Long WALE REIT is not just invested in one or two sectors – it has the investment flexibility to invest across the entire property sector.
Strongly diversified
I think the way the business is able to change its portfolio and look at the best property opportunities means it can always future-proof itself and ensure the portfolio can deliver rental growth and capital growth for the decades to come, not just a year or two. It can sell out of, or buy into, property sectors.
The oversold ASX stock says it focuses on key defensive tenant industries, which are resilient to economic shocks.
Some of the areas its portfolio is invested in includes pubs and hotels, government-related buildings (such as Geoscience Australia), telecommunications and data centres, service stations, grocery and distribution, food manufacturing, waste and recycling management, Bunnings properties and so on.
Its portfolio occupancy is 99.9% and a long weighted average lease expiry (WALE), underpinned by leases to secure, blue-chip tenants with annual rental increases. Its WALE is around 9 years, suggesting long-term stability.
High level of passive income
In FY26, the business is expecting to generate operating earnings per security (EPS) of 25.5 cents and it's also expecting to pay a distribution per security of 25.5 cents.
That's very generous for shareholders and doesn't necessarily affect earnings growth too much because it already has contracted rental growth with its tenants.
By having a 100% distribution payout ratio of operating earnings, it supports a high distribution yield.
At the current Charter Hall Long WALE REIT security price, it has a distribution yield of 5.8%. That's much better than what we can get from a term deposit.
Still trading at a discount
In every result, the business reveals what its underlying value is, which is usually measured by the net asset value (NAV) or the net tangible assets (NTA) per security.
At 30 June 2025, the ASX oversold stock's NTA per security was $4.59, so at the time of writing it's trading at a discount of 4%. While that discount as not as high as it was last year, it's still a discount and the NTA could rise following multiple rate cuts by the RBA this year.
I think it's a solid investment choice for income in the coming years.
