Why this ASX share is a retiree's dream for FY27

This business offers a number of positives for retiree investors.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX share Charter Hall Long WALE REIT (ASX: CLW) looks to me like a top pick for retirees and anyone wanting passive income.

Commercial property typically offers a much higher rental yield than residential property, allowing it to provide investors with attractive passive income.

Real estate investment trusts (REITs) are the structure that allows investors to invest in commercial property on the ASX.

For me, Charter Hall Long WALE REIT is one of the leading picks for retirees for a number of reasons.

Elderly couple using laptop at home while drinking a cup of coffee.

Image source: Getty Images

Diversification

The business can offer investors significant diversification because it's invested across a number of key defensive tenant industries that are supposedly resilient to economic shocks.

It's invested in areas that have tenants across government areas (like Geosciences Australia), hotels, grocery and distribution, telecommunications exchanges, data centres, service stations, banking and professional services, food manufacturing, healthcare, Bunnings properties, and more.

To be able to make one investment and get exposure to all of those sectors sounds appealing to me.

In terms of the quality of tenants, the organisations that account for at least 5% of revenue include government entities, Endeavour Group Ltd (ASX: EDV), Telstra Group Ltd (ASX: TLS), BP, Coles Group Ltd (ASX: COL) and Metcash Ltd (ASX: MTS).

The tenants are signed on for long-term contracts, giving investors long-term income security. Charter Hall Long WALE REIT currently has a weighted average lease expiry (WALE) of around nine years, which is a comforting length of time for retirees.

Ongoing rental growth

A REIT is not a term deposit; it's capable of delivering growth for investors.

The business has rental growth built into its contracts, which is a good tailwind for both rising property values and increasing the distribution over time.

Some of the properties have rental income growth linked to inflation, while the rest have fixed annual increases. This combination helped the business achieve average annual net property income growth of 3.1% in FY26.

I think rising rental income is a key factor that helped the business report a 2.6% year-over-year improvement in net tangible assets (NTA) during FY26.

Strong passive income yield

The business has a very generous distribution payout ratio of 100% of its rental earnings, giving investors a large yield.

It's also trading at a large discount to its underlying value – the NTA was $4.71 as of 30 June 2026. That means it's trading at a 28% discount, which is enormous for a high-quality REIT, in my view.

The ASX share expects to pay an annual distribution of 25.5 cents per security in FY27, which translates into a distribution yield of 7.5%. I think that's very appealing, and I'd happily buy some units if I were a retiree.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended BP. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retirement

Retirement plan written on a chalkboard with increasing bar graphs and dollar signs on top.
Superannuation

Did this $3.4 billion Black Swan event just put your superannuation at risk?

A top analyst highlights serious potential risks for millions of Aussie’s superannuation accounts.

Read more »

Retiree using a laptop outside his house.
Retirement

How much can Australian pensioners own and earn under new rules starting next week?

Several changes will become effective next Sunday, 20 September.

Read more »

Person holding alarm clock with work and retire written.
Superannuation

How much do I need to invest in ASX shares to retire with an extra $1 million on top of my superannuation?

Wouldn’t it be nice to retire with an extra $1 million on top of your super balance? Here's how I'd…

Read more »

An older farmer stands arms crossed among his crop, staring across the field.
Retirement

How much income can you earn while still qualifying for the age pension?

The amount of investment or wages income you can earn goes up on 20 September.

Read more »

Man holding fifty Australian Dollar banknotes in his hands, symbolising dividends.
Superannuation

How much do I need in my superannuation to retire comfortably at age 57?

Is your super balance on track for retirement?

Read more »

Numerous Australian dollar notes laid out.
Superannuation

How much superannuation do I need to earn $100 a day in passive income?

To earn a $100 daily passive income, how much superannuation will I need to invest?

Read more »

Australian dollar notes in a nest, symbolising a nest egg.
Superannuation

How much passive income can I earn off a $750,000 superannuation balance?

Investing in quality ASX dividend shares can provide a reliable annual passive income stream.

Read more »

A man sits at a desk holding a small replica house in his hand, upset at the sale of his property.
Retirement

How much in assets can you own while still qualifying for the age pension?

The value of investment assets you can own is set to rise on 20 September.

Read more »