Commonwealth Bank of Australia (ASX: CBA) is one of the leading ASX stocks in its industry, if not the outright leader. But, there are a few businesses that look more appealing to me such as Charter Hall Long WALE REIT (ASX: CLW).
The real estate investment trust (REIT) can provide investors with the stability they may be searching for with CBA stock.
CBA has a reputation for a solid dividend yield, a growing payout and a connection to the Australian economy. The business ticks all of the boxes, in my view.
Let's start with its exposure to the Australian economy, so I can explain what the ASX stock does.
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Diversified exposure to the Australian economy
A REIT allows investors to gain exposure to a property portfolio. I'd describe the Charter Hall Long WALE REIT as the most diversified option available to Australians.
It's invested across a number of areas including hotels and pubs, government tenants (such as Geoscience Australia), data centres and telecommunications, service stations, grocery and distribution, food manufacturing, waste and recycling, Bunnings properties and more.
While CBA provides loans across the Australian economy, the REIT doesn't come with bad debt risks. I think Charter Hall Long WALE's operating earnings are more defensive than CBA's in some ways.
The REIT has a number of listed tenants including Endeavour Group Ltd (ASX: EDV), Telstra Group Ltd (ASX: TLS), BP, Coles Group Ltd (ASX: COL), Metcash Ltd (ASX: MTS), Wesfarmers Ltd's (ASX: WES) Bunnings, Westpac Banking Corp (ASX: WBC) and Myer Holdings Ltd (ASX: MYR).
The business said it's focused on key defensive tenant industries, which are resilient to economic shocks. It has a 99.9% occupancy rating and a weighted average lease expiry (WALE) of around 9 years.
Solid dividend yield
The ASX stock expects to pay a distribution per unit of 25.5 cents in FY26.
That means the forward distribution yield is currently approximately 6%, which is comfortably above what passive income levels CBA are offering investors.
According to the (independent) forecasts on Commsec, Commonwealth is projected to pay an annual dividend per share of $5.25. That translates into a grossed-up dividend yield of 4.25%, including franking credits.
There's a noticeable difference between the yields of both businesses.
Passive income growth
Now that the interest rate has reduced, the operating environment for REITs is becoming easier because of the reduced cost of debt as well as the boost to property values.
The ASX stock is benefiting from regular rental increases across its property portfolio. In FY25, it reported like-for-like property income growth of 3%. Some rental contracts are linked to inflation, while others see fixed annual increases.
Ongoing rental growth can boost operating earnings of the business, which in turn helps fund a higher distribution for the ASX stock.
