Charter Hall Long WALE REIT (ASX: CLW) share price could be one of the most compelling ASX dividend share options for income.
It’s a real estate investment trust (REIT) that owns a large portfolio of different properties.
Whilst it isn’t the biggest REIT on the ASX, it is building a reputation as being one of the most dependable for dividends. It’s rated as a buy by a few different brokers, including Citi. Here are some of the reasons why it’s attractive:
It has a property portfolio that is now worth $7 billion, which the business describes as high-quality and diversified. There are 549 properties, with 79% of them located on the eastern seaboard of Australia.
The portfolio is diversified across different sectors including agri-logistics (4%), social infrastructure (13%), office (19%), industrial and logistics (21%), hospitality (22%), convenience retail (11%) and ‘diversified long WALE retail’ (9%).
Nearly all of the tenants are blue chip tenants – 99% are either government, ASX-listed, multinational or national. Some examples include the Australian Government, Telstra Corporation Ltd (ASX: TLS), BP and Endeavour Group Ltd (ASX: EDV).
The ASX dividend share is expecting to pay a distribution of at least 30.5 cents per security. Charter Hall Long WALE REIT typically pays a distribution of 100% of operating earnings.
Assuming a payout of 30.5 cents, that translates to a current distribution yield of 6.1% at the current Charter Hall Long WALE REIT share price.
Morgan Stanley, one of the brokers that rates the business as a buy (with a price target of $5.85), thinks that the REIT will pay a distribution of 6.4% in FY23.
Reliability and organic growth
The REIT is proud of its income security. It has a portfolio weighted average lease expiry (WALE) of 12.2 years. Management says that this provides insulation from market shocks. It also gives investors a lot of visibility and security about the rent.
Rental income growth is driven by annual rent increases in all leases. Around 46% of leases are linked to CPI with a 3.3% weighted average increase in the first half of FY22. The other 54% of leases have fixed increases, with an average fixed increase of 3.1%.
This has allowed the business to continue growing the distribution per security by an average of 3.7% per annum since it listed several years ago.
In FY22 it’s expecting to grow the distribution by at least 4.5%, adding to the ongoing growth.
Charter Hall Long WALE REIT share price valuation
At the time of writing, the REIT’s share price is at $5.01. That compared to the net tangible assets (NTA) of $5.89 at 31 December 2021. That implies a discount of around 15%.
Should you invest $1,000 in Charter Hall Long WALE REIT right now?
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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 no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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