Just take a look at the dividend yields currently forecast by analysts:
- Elders Ltd dividend: 2.6%
- Rural Funds Group dividend: 5.4%
- Ruralco dividend: 3.1%
Why consider agricultural stocks?
The agricultural sector is notoriously difficult to make a consistent income and profit — just ask farmers. Changes in weather, market prices, competition, demand, disease… you name it, it can happen.
However, there is growing speculation that Australia could become ‘the food bowl of Asia’. Given our proximity to China, in particular, there is potential for our agricultural sector to boom.
Elders is a diversified agricultural business with key inputs into many different areas of the farming supply chain. It recently decided to offload its live export business and upped its stake in its insurance business. After years of recovery, management is striving to once again reinstate its dividend and grow the business.
Rural Funds Group
Rural Funds Group is a real estate investment trust (REIT) focused on the agricultural sector. It aims to generate long-term capital growth and income for investors. The fund’s key investment is in water entitlements. The REIT has an enviable track record of paying quarterly dividends to investors.
Like Elders, Ruralco offers diversified exposure to farming. The company’s Water Services and Rural Supplies, which includes real estate, fertilisers and livestock agency, generate the bulk of the company’s profit. Pleasingly, it appears set to keep returning cash to shareholders, with recent trading activity exceeding the prior year. It also recently announced a $65 million capital raising to fund acquisitions and improve the balance sheet. Ruralco is backed by conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which holds around 20% of shares.
Where to invest $1,000 right now
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The Motley Fool Australia owns shares of Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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