The Motley Fool

Rural Funds Group (ASX:RFF) is acquiring another cattle and cotton farm for $28 million

Rural Funds Group (ASX: RFF) is Australia’s leading ASX-listed real estate investment trust (REIT) farm landlord. It’s my favourite REIT.

Its strategy is to acquire farms, invest capital into productivity improvements and receive increasing rental income over the long-term.

Today, Rural Funds announced more acquisitions after its recent JBS cattle transaction. Rural Funds management didn’t hang around.

Cattle property acquisition

The property, Cerberus, is an 8,280 hectare cattle breeding and backgrounding property locked near Rockhampton in Queensland. The cost is $10 million.

The tenant will be Katena Pty Ltd, trading as Bryant Beef, with a 10 year lease and a rent review in year five. The lease rate is consistent with existing cattle property leases. Interestingly, Rural Funds will also provide a $1.6 million cattle finance facility.

Rural Funds plans to spend $2.5 million to increase the carrying capacity by 28% and improve the infrastructure. This will attract additional rent.

Cotton property acquisition

The cotton property, Mayneland, is a 2,942 hectare property located near Lynora Downs – another cotton property owned by Rural Funds in central Queensland. Of the total, 531 hectares is an irrigated assets and 1,757 of dryland area. The purchase price, including plant & equipment, is for $18 million.

Included in the purchase is 11,234 ML of water entitlements, of which a significant amount is unutilised according to Rural Funds. The REIT will invest to make an additional 579 hectares of irrigated area, and a 2,500 megalitre water storage facility is planned.

Rural Funds Management (RFM), the manager of Rural Funds, will operate the property until it can find a tenant before the FY20 cotton season.

Foolish takeaway

I’m glad to see Rural Funds expand in the cotton sector, as well as increasing its diversification. I am not sure whether Rural Funds increasing its cattle financing is a good idea – I’m not saying it’s bad, I just don’t know. I’m sure management think it’s a good way of increasing and diversifying earnings.

The FY19 forecast of adjusted funds from operations, the net rental per unit, will be 13.2 cents and distribution of 10.43 cents per unit remain unchanged. As a unitholder I’m pleasing with today’s announcement.

Another quality dividend idea is this top share which just grew its dividend by 20%.

The best dividend stock to buy in September

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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 Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now