The ASX dividend stock HomeCo Daily Needs REIT (ASX: HDN) has fallen 35% (at the time of writing) from its peak around five years ago, and it’s down 15% from August, as the chart below shows.
It’s an Australian real estate investment trust (REIT) that invests in convenience-based assets across the sub-sectors of neighbourhood retail, large format retail, and health and services. It aims to give investors consistent and growing distributions.
Its property portfolio is worth more than $5 billion of assets across 2.3 million square metres of land across Sydney, Melbourne, Brisbane, Perth, and Adelaide. It’s also a strategic investor in unlisted funds.
Potential passive income
Following a large decline of the share price, the yield on offer is boosted. For example, when a business with a 6% distribution yield falls 10%, the yield becomes 6.6%.
We’re talking about a larger decline with the HomeCo Daily Needs REIT unit price, and hence, the distribution yield is noticeably larger.
The business expects its net rental profit, or funds from operations (FFO), for the 2027 financial year to be 8.8 cents per security. The distribution per unit is forecast to be 8.6 cents per security, so the business expects to retain a little bit of its rental profit with a distribution payout ratio of 97.7%.
If those projections become reality, the FFO per unit will drop 2.2%, and the distribution will be maintained.
Excitingly, the forecast payout for FY27 will be a distribution yield of 8%. That’s significantly better than what term deposits offer.
While rising interest rates are a headwind for the business, stopping growth in FY27, the last few years did see slight distribution growth, showing it can deliver growth under normal economic conditions.
Large asset discount with the ASX dividend stock
One of the easiest ways to value the ASX dividend stock, or most REITs, is by looking at the net tangible assets (NTA) or net asset value (NAV). That figure includes the net figure with the value of the properties, loans, cash, and other assets and liabilities. It’s meant to reflect the true underlying value of the business at the time.
It reported NTA of $1.56 at 30 June 2026, so it’s trading at a 30% discount to this figure.
The ASX dividend stock reported 4% comparable property net operating income growth in FY26, along with 5.9% leasing spreads (5.9% rental growth for newly signed leases compared to the old rental rate). That shows that it’s producing solid underlying performance.
This period of higher interest rates is tough, but I think it has opened up a compelling buying opportunity.
The post 1 ASX dividend stock down 35% I’d buy right now 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 recommended HomeCo Daily Needs REIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.