Forget term deposits! I’d buy these two ASX 300 shares instead

Term deposits look much more appealing these days following the RBA interest rate rises. Getting a return of more than 5% with no risk sounds pretty good! But, I’d still prefer to invest in S&P/ASX 300 Index (ASX: XKO) shares for passive income.

In fact, this looks like a fantastic time to invest in names that have been impacted by elevated interest rates, but could benefit when rates are reduced again. 

I’m particularly thinking about real estate investment trusts (REITs), because they offer exposure to fairly high-yielding commercial properties, but higher rates increase debt costs and are a headwind for property values.

There are two names I really want to highlight: Centuria Industrial REIT (ASX: CIP) and Dexus Industria REIT (ASX: DXI). Both of these businesses are focused on owning industrial properties. There are three compelling reasons to look at them today.

Good dividend yield

The yields on offer from these two businesses are more appealing to me than those from term deposits.

Centuria Industrial REIT’s FY26 payout is 16.8 cents per unit, which translates into a current distribution yield of 5.45%.

Dexus Industria REIT’s FY26 payout is 16.6 cents per unit, which equates to a distribution yield of 6.8%.

Perhaps even more importantly than those impressive yields, the payouts from these two businesses can grow in the long-term thanks to rental income growth.

Rental income tailwinds

There are many different property sectors we could invest in, such as shopping centres, office buildings, storage units, childcare centres, and so on.

I think it makes the most sense to invest in businesses with sustainable income growth because that’s a key driver of profit growth, which funds passive income and supports a higher share price.

Industrial properties have a number of tailwinds, including e-commerce growth, the onshoring of supply chains, data centre growth, refrigerated space growth (for food and medicine), and Australia’s growing population.

All of the above is leading to a very low vacancy rate and solid organic revenue growth for the two ASX 300 shares.

In the third quarter of FY26, Centuria Industrial REIT reported FY26 re-leasing spreads averaged 36%, reflecting the “significant under-renting” within the portfolio and the “ongoing comparatively strong market conditions that are prevalent across Australian industrial markets, particularly within infill locations.”

In other words, the new rental contracts generated 36% more rental income than the older rental contracts.

Dexus Industria REIT’s FY26 half-year result included like-for-like income growth of 7.4%, supported by rental escalations, strong re-leasing spreads and higher average occupancy throughout the period.

That strong level of rental growth can help offset the short-term headwind of higher interest rates.  

Appealing valuation

Both of these ASX 300 shares are trading at a large discount to their underlying value – the net tangible assets (NTA) per unit includes the loans, the property values, cash in the bank and so on.

At 31 December 2025, Dexus Industria REIT reported NTA per security of $3.39 – it’s trading at a 28% discount to this. The Centuria Industrial REIT is trading at a 22% discount to its December 2025 NTA of $3.95.

I don’t know when the next interest rate cut will be, but when we enter that period, it could be a strong tailwind for property valuations and the unit prices of the ASX 300 shares. Of course, there are more ASX shares that could also be compelling buys today for passive income.

The post Forget term deposits! I’d buy these two ASX 300 shares instead appeared first on The Motley Fool Australia.

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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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.