Why Macquarie tips this dividend paying ASX 200 REIT to outperform in FY 2026

S&P/ASX 200 Index (ASX: XJO) real estate investment trust (REIT) Dexus (ASX: DXS) is forecast to outperform in the year ahead.

That's according to the team at Macquarie Group Ltd (ASX: MQG), who analysed the outlook for Dexus following the company's FY 2025 results release yesterday.

In afternoon trade on Thursday, Dexus shares are just about flat, changing hands for $7.45 apiece.

That sees shares up 11.5% in 2025 and up 8.2% over 12 months.

Atop those gains, the ASX 200 REIT also trades on a 5.0% unfranked dividend yield.

Now, here's why Macquarie has a bullish outlook on Dexus shares.

ASX 200 REIT 'trading at a discount'

For FY 2025, Dexus reported adjusted funds from operations (AFFO) of $483.9 million.

The Australian property investor, developer, and manager also returned to net profits for the year.

Statutory net profit after tax came in at $136.1 million, compared to a statutory net loss after tax of $1.58 billion in FY 2024. The big improvement on the bottom line was credited to stabilising capitalisation rates driving significantly lower fair valuation losses

As for its property portfolio, the ASX 200 REIT reported occupancy across its office portfolio of 92.3%, with occupancy at its industrial portfolio of 96.2%.

The company said rent collections remained strong over the 12 months at 99.6%.

Digging into those results, Macquarie said that while AFFO declined by 6% year on year, that was in line with its own expectations.

Looking to the year ahead, the broker said the AFFO outlook remains subdued in the near term. But noting that the stock is trading at a 15% discount to $8.81 net tangible assets (NTA), Macquarie said that the subdued outlook already looks priced in.

Pointing to other potential tailwinds for the ASX 200 REIT, the broker also indicated that it looks like we have "passed an inflection point for the property market".

On the office market front, Macquarie said:

Office outlook shows signs of moving past the bottom of the cycle with demand gaining momentum and positive net absorption (strongest in premium assets). DXS expects solid effective rent growth across CBD markets over the next 3 years, and the strongest in CBD premium assets (e.g., Sydney premium +6-8%) where DXS has good exposure (76% located in core CBDs).

Connecting the dots, Macquarie raised its 12-month target price for the ASX 200 REIT to $7.96 (from $7.50).

That represents a potential upside of almost 7% from current levels. And it doesn't include those upcoming FY 2026 Dexus dividends.

"We continue to like the stock on an expected turning point in office near term, and on valuation." Macquarie concluded.

The post Why Macquarie tips this dividend paying ASX 200 REIT to outperform in FY 2026 appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2025