The ASX dividend stock Charter Hall Social Infrastructure REIT (ASX: CQE) has fallen more than 30% since its peak at the end of 2021. I think this looks like a good time to invest for a few different reasons.
Firstly, let's talk about what this business does. This business says it's the largest real estate investment trust (REIT) that invests in social infrastructure properties. That largely refers to childcare centres, but also includes, education life sciences and health, government services and transport.
Childcare receives significant government funding, which is expected to increase to $16 billion per year in FY27, according to the business.
Let's look at the three things that are appealing about this ASX dividend stock in the current economic environment.
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Strong and growing rental earnings
The business has an extremely impressive 100% occupancy rate, with a long weighted average lease expiry (WALE) of 11.9 years. This means the business is maximising its rental potential and the rental earnings are locked in for a long time.
The business benefits from organic rental growth thanks to market reviews at its properties – during HY25, it achieved a 16.4% increase on 15 childcare market reviews completed during the period.
It said that 43% of rental income is subject to market rent reviews in the next four years, which could mean further pleasing rental growth in the coming years.
Pleasing distribution
As a REIT, the business is able to pay out most of its rental profit each year, without harming its ability to pay future distributions.
The ASX dividend stock is expecting to grow its annual distribution by 1.33% in FY25 to 15.2 cents per unit. It's good to see distribution growth, despite the elevated interest rates we're still living through.
At the current Charter Hall Social Infrastructure REIT unit price, it offers a distribution yield of 5.4% for FYF25.
Interest rates to fall?
Nothing is certain when it comes to the interest rate outlook. The global economic picture is constantly changing with US tariffs and the responses and impacts relating to other countries.
But, economists seem to largely agree that further rate relief by the Reserve Bank of Australia (RBA) could be coming over the rest of the year.
If rates are reduced, then this could help the ASX dividend stock's rental profit and boost the value of the REIT's properties. This could also help push the share price higher, helping shareholder returns.
