Examining results gives us a chance to get a look under the ‘hood’ of businesses. Companies that have been sold off over the last few months could be attractive opportunities because investors have put them on a lower valuation.
While not every business is worth buying just because it has fallen, I do believe that some of them may have been oversold.
In my opinion, there may be some real estate investment trusts (REITs) that now look like good ASX 200 dividend share opportunities because of investor concerns surrounding inflation and rising interest rates.
Here are two I’ve been looking at:
Charter Hall Long WALE REIT (ASX: CLW)
Since the end of April 2022, the Charter Hall Long WALE REIT share price has dropped almost 20%. That’s a hefty drop for what is typically seen as a defensive sector. It’s invested across a range of property sectors including industrial, retail, and agri-logistics.
In its FY22 result, the business noted that its operating earnings had grown by 4.5% and that the net tangible assets (NTA) per unit rose by 18.2% to $6.17.
The REIT noted that the portfolio weighted average lease expiry (WALE) was 12 years at year-end, which provides “long-term income security”. I think this also provides useful visibility for the potential future distributions.
Rental income looks as though it’s going to grow at a good pace. In FY22, 51% of leases were fixed with an average fixed increase of 3.1%, while 49% of leases were CPI-linked, up from 40% in FY21. The CPI-linked leases are expected to grow by 6.3% in FY23.
The ASX 200 dividend share is expecting to pay a distribution per security of 28 cents in FY23. That translates into a forward distribution yield of 6.4%.
Centuria Industrial REIT (ASX: CIP)
As the name suggests, this REIT is focused on industrial properties.
In FY22, its portfolio expanded to 88 “high-quality” industrial assets worth $4.1 billion. It had an 8.3-year WALE with a 98.8% portfolio occupancy.
Its NTA per unit increased by 11% to $4.24 and its funds from operations (FFO) (the net rental profit) rose 22%.
In FY23, the business is expected to generate FFO per unit of 17 cents and it expects to pay a distribution of 16 cents per unit. That would translate into a distribution yield of 5.35%.
The Centuria Industrial REIT share price has dropped almost 30% in 2022.
Jesse Curtis, the fund manager of the ASX 200 dividend share, gave commentary on the state of play for industrial property, which could also be applied to some of Charter Hall Long WALE REIT’s properties:
Globally, industrial real estate continues to benefit from strong tailwinds. Increasing e-commerce, and securing supply chain resilience, are driving strong demand. Domestically, despite recording strong rental growth during FY22, Australia’s industrial market continues to see robust tenant demand. Labour shortages, supply change disruption and limited industrial zoned land have resulted in new industrial accommodation being in short supply.
Coupled with sustained demand generated from trends of growing e-commerce adoption and increased reshoring, this is creating an environment for prolonged rental growth, particularly within urban infill markets where Centuria Industrial REIT has 85% of its portfolio.
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