I'm looking at some ASX dividend shares for options that could be attractive passive income opportunities.
High interest rates have particularly impacted some ASX share market sectors, such as consumer discretionary companies, and also property businesses like real estate investment trusts (REITs).
However, it seems that Australian interest rates cuts are getting closer. The European Central Bank made one of the latest moves to cut rates, and some experts think that Australia's first rate cut may now be just months away.
With that in mind, I think there are a few ASX dividend shares we should pay attention to before rate cuts happen, including the two below.
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Centuria Industrial REIT (ASX: CIP)
This is one of my favourite REITs because of the exposure it gives investors to large industrial properties around Australia's cities.
The explosion of e-commerce in the last few years has led to a significant increase in demand for distribution and logistics facilities, which Centuria Industrial REIT can provide.
This huge demand is leading to strong rental increases. In FY24, the REIT reported positive re-leasing spreads of 43%, which means it is receiving 43% more rent on new contracts than previously.
Grant Nichols, the REIT's fund manager, has this to say:
Looking ahead, strong sector tailwinds such as ecommerce adoption, onshoring of production and assembly, data centre growth and increased demand for cold storage will continue to benefit Australian industrial markets, particularly infill industrial markets where these tailwinds are generating the greatest tenant demand.
For a portfolio with existing critical mass in Australian urban infill industrial markets, CIP is positioned to benefit from these tailwinds given the limited potential for additional supply within these markets.
The Centuria Industrial REIT share price is currently trading at a discount of around 15% to its net tangible assets (NTA) at June 2024, which suggests to me there is good value on offer. I think this discount could close up when interest rates start lowering.
The ASX dividend share is guiding that it could increase its distribution to 16.3 cents per unit in FY25, which would be a distribution yield of 5%.
Nick Scali Limited (ASX: NCK)
Nick Scali is one of Australia's leading furniture retailers, with its Nick Scali and Plush businesses. It recently expanded into the United Kingdom following its acquisition of Fabb Furniture.
The company aims to increase its Australian store count by more than 50% over the long term to between 176 and 186 stores. I wouldn't be surprised if it expanded to at least 100 stores in the UK, where it currently has 20 stores. Nick Scali hasn't decided on a future UK goal yet, but the UK has a much larger population than Australia.
Both Australia and the UK have tough market conditions for Nick Scali, but I believe the retail environment could improve for the company if interest rates increase, putting more money into household budgets.
The ASX dividend share impressively grew its dividend every year between 2013 to 2023, with a relatively small reduction under the circumstances to 68 cents per share in FY24. The FY24 payout translates into a grossed-up dividend yield of 6.4%.
