ASX dividend shares with yields above 5% may be attractive in this environment considering how low interest rates are right now.
The Reserve Bank of Australia (RBA) interest rate is essentially 0%, which means that money in the bank is earning almost nothing.
Here are two real estate investment trusts (REITs) that have a relatively high dividend yield:
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Rural Funds Group (ASX: RFF)
Rural Funds is a farmland landlord. It owns a variety of different farm types including cattle, almonds, macadamias, vineyards and cropping (cotton and sugar).
It has a number if high-quality tenants like JBS, Australian Agricultural Company Ltd (ASX: AAC), Stone Axe, Treasury Wine Estates Ltd (ASX: TWE), Olam and Select Harvests Limited (ASX: SHV).
Rural Funds recently provided guidance for its FY22 distribution, which is expected to be 11.73 cents per unit, which currently translates to a distribution yield of just over 5% at the current Rural Funds share price.
The ASX dividend share has a key goal of increasing its distribution for shareholders by at least 4% per annum. It has been successful with this each year since it listed in FY15. This has come with net rental profit growth, measured by adjusted funds from operations (AFFO).
Rural Funds' rental income is steadily growing thanks to the rental indexation that is built into its rental contracts. Some of the rental increases are a fixed 2.5% increase per annum, whilst others are linked to CPI inflation, plus market reviews.
Rural Funds is also growing its rental profit and distribution thanks to productivity improvements at the farms such as improved irrigation or more water access points for animals.
Centuria Industrial REIT (ASX: CIP)
This is another REIT with a focus on delivering good income returns to investors.
It's one of Australia's largest industrial-only REITs. It has locations spread across metro areas around Australia, with a diverse tenant base.
Centuria recently announced its FY21 half-year result which said that it made $42.8 million of funds from operations (FFO), equivalent to 8.8 cents per unit and it upgraded its FFO guidance to no less than 17.6 cents per unit. It's currently rated as a buy by UBS, with a share price target of $3.38.
At the time of the result release, the ASX dividend share said that it had 59 industrial assets worth $2.4 billion, an occupancy rate of 97.7% and a weighted average lease expiry of 9.8 years.
The distribution is expected to be 17 cents per unit, which equates to a forward yield of 5.7%.
A couple of weeks ago, the REIT announced it was spending $26.25 million on a Bella Vista warehouse acquisition in North Western Sydney. It has a close connection to the M2 and M7 motorways. This increase its NSW portfolio weighting to 25%.
The Bella Vista transaction takes Centuria Industrial REIT's acquisitions throughout FY21 to 12 assets, worth $757.2 million.
The acquisition will be funded with existing debt and settlement is expected in March 2021.
Centuria Industrial REIT fund manager Jesse Curtis said:
This acquisition increases CIP's exposure in the tightly held Sydney industrial market. Using our in-house capabilities, CIP has a strong track record in delivering value-add opportunities and this latest asset adds to our existing pipeline. Being a high-profile location, in a true infill area, the asset will appeal to a broad range of potential users.
