I rate this ASX dividend stock as a top buy right now

I think this stock could be a leading buy for income today.

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The ASX dividend stock Centuria Industrial REIT (ASX: CIP) is one of my favourite real estate investment trusts (REITs), and I think it's a top buy right now.

In my view, the REIT is a compelling business for several different reasons. The distribution yield is pleasing for a start, but there are a few other factors that make this business attractive.

It owns a portfolio of industrial properties across Australia, which is a good subsector and provides good diversification. Let's get into why I view business so positively.

Strong tenant demand

There is only a limited amount of land in our capital cities for industrial properties – the supply of new buildings is struggling to keep up with the demand.

Why is there so much demand? For starters, the Australian population has increased significantly in the past two or three years. Each person in the country, on average, requires a bit of industrial warehouse space for the products and services they pay for.

E-commerce is increasing in Australia, leading to a bigger demand for distribution centres. There's also growing demand for refrigerated space for food and pharmaceuticals, and data centre demand continues to grow.

Multiple factors drive demand for the ASX dividend stock's properties, which can help increase the underlying value of the real estate.

Growing earnings

The improving demand for industrial space is boosting rental income and profits. I think this is a key driver of the value of the properties and, hopefully, the Centuria Industrial REIT share price in the long term.

In the FY25 half-year result, the business reported achieving like-for-like net operating income growth of 6.4%. I think that bodes well for the foreseeable future.

With the possibility of further RBA rate cuts during 2025, I think it's quite possible the rental profits of this ASX dividend stock could materially improve over the next two or so years thanks to lower debt costs and higher rental income. The rental profits are key to continuing to pay the distribution.

Good distribution yield

While it doesn't have the biggest yield in the sector, I think it's comfortably better than what a term deposit can offer. Plus, there's potential for income growth over time.

In FY25, the business is expected to pay a distribution per unit of 16.3 cents.

That guided amount translates into a forward distribution yield of 5.6%.

Overall, I think there's a lot to like about this business, particularly as it's trading at a 26% discount to the net tangible assets (NTA) as at December 2024 of $3.89.

Motley Fool contributor Tristan Harrison has positions in Centuria Industrial REIT. 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.

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