As someone who prefers not to invest in banks, my options for good ASX dividend shares are somewhat limited. Personally, I feel the best way to get a good income portfolio is to buy great dividend paying companies when they are selling cheap.
For instance, I bought Fortescue Metals Group Limited (ASX: FMG) shares in early April when they had a ~9.7% trailing 12-month (TTM) dividend yield. Today, the same shares have a 6.73% TTM dividend yield. In fact, many large-cap ASX dividend shares have returned to pre-pandemic valuations or higher.
Speaking in broad terms, however, there are two sectors in which share prices are yet to bounce back to those seen prior to the coronavirus crisis. First, the travel sector. Travel shares like Flight Centre Travel Group Ltd (ASX: FLT) and Regional Express Holdings Ltd (ASX: REX), for example, offer great dividend yields due to their current low share prices. Nevertheless, the entire sector is far too risky for me at the moment.
The second sector in which share prices remain deflated is real estate. In this instance, I think there are plenty of bargains around. You just need to exercise a bit of caution.
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ASX real estate dividend shares
Offices have been one of the more robust real estate asset classes during the pandemic, unlike housing or retail.
Residential housing depends on consumer confidence and, in recent months, this has begun to wane. In particular, a report from the Australian Bureau of Statistics (ABS) shows that new approvals for total dwellings was down by 16.4% compared to April.
Likewise, in my view, retail real estate investment trusts (REITs) also represent a little too much uncertainty in the current market. GPT Group (ASX: GPT), for example, had 8 of the company's retail assets revalued during the pandemic. It resulted in a reduction in value of $476.7 million, or approximately 8.8% compared to the 31 December 2019 book value.
With ASX dividend shares that focus on office buildings, however, it is a little different. Offices are generally leased on a long-term basis, and often to large corporate clients. The important key performance indicator here is the weighted average lease expiry, or WALE. The WALE is a guide to the average contract duration.
Centuria Office REIT (ASX: COF)
On that note, let's take a look at Centuria Office REIT. This is currently my top pick among ASX dividend shares and one I will most likely buy into over the next week or so. Centuria Office is Australia's largest ASX-listed pure play office REIT. The company has an occupancy of 99.2%, which I find impressive, and a WALE of 5.1 years. In addition, it manages a portfolio of high quality office assets worth $2.1 billion.
At the time of writing, the market capitalisation of Centuria Office is $1.01 billion; just over half the value of its total office assets. In fact, the company's net tangible asset (NTA) value per share is $2.57, which is ~31% higher than the share price at the time of writing. Most importantly, at its current price, the company has a TTM dividend yield of 9.06%.
As a mark of how resilient office real estate has been during the pandemic, Centuria had 57% of its portfolio (by value) externally valued, with the remainder evaluated by company directors. The result was a reduction in value of only 1.1%. In addition, from April 2020 to June 2020 rent collection has averaged 89% despite the fact the company continues to work with tenants adversely impacted by COVID-19.
Foolish takeaway
I think Centuria Office is one of the most attractive, ASX dividend shares available today. It has shown robust performance during the pandemic, yet remains at a share price ~31% lower than the company's NTA per share. Lastly, it has a great TTM dividend yield of 9.06%.
As such, I'm likely to buy into this company in the near term. I expect it to deliver solid capital growth and a decent income over the next 2 – 3 years.
