I think Centuria Industrial REIT (ASX: CIP) is one of the most underrated ASX passive income stocks available to Australians.
The business owns a portfolio of high-quality industrial assets that are located in key metropolitan locations throughout Australia, and is underpinned by a strong and diverse mix of tenants.
It aims to generate income and deliver long-term capital growth for investors. Let's take a look at how rewarding the passive income could be and why it's an undervalued buy.
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Rewarding passive income
Typically, commercial property can provide a much stronger income yield than residential property.
Each year, the ASX stock gives distribution guidance for the financial year ahead thanks to the predictable income and expenses.
For FY26, the business is planning to pay an annual distribution per unit of 16.8 cents. That translates into a forward distribution yield of 5.6%, at the time of writing. Pleasingly, that expected FY26 distribution would represent year-over-year growth of 3%. Any growth from a real estate investment trust (REIT) is pleasing to me during this period of higher interest rates.
Its distribution payout ratio is also at a sustainable level where it's retaining some of its rental profit which can be used to improve the balance sheet in some way. If it achieves the bottom of its rental earnings (funds from operations (FFO)) guidance of 18.2 cents per unit, then the payout ratio would be 92% – noticeably less than 100%.
In the long-term, I expect the ASX stock's distribution to increase thanks to good demand for industrial property (such as e-commerce growth), rising rental income with new leases from its portfolio and potentially improvements in its gearing levels.
$250 per month of passive income
The payment frequency from this ASX stock is pleasing, with a distribution every three months. That's not monthly income, of course.
So, we need to think of the goal as an annual target and then divide it by 12.
To receive $250 per month, we're talking about $3,000 annually.
Using the passive income projection of 16.8 cents per unit, we'd need 17,858 Centuria Industrial REIT units for the income goal.
Very undervalued business
The Centuria Industrial REIT unit price looks significantly undervalued to me.
The ASX stock's net tangible assets (NTA) was $3.95 at 31 December 2025, a current valuation discount of around 25%.
During the three months to 31 March 2026, the business divested $188 million of properties at a premium to the balance sheet value of 17%, reducing gearing by approximately 3%.
Since FY23, the business has sold around $460 million of assets at an average premium to book value of 12%. So, the NTA could actually be less than its true underlying value.
Considering the sizeable passive distribution income yield, I think the discount is real and this could be a great time to invest for the long-term.
