Everyone needs to eat. What’s more, I like to eat, as I am sure you do too. I am also aware that as the population increases, both here in Australia and globally, we will consume more food. Additionally, as the standard of living increases around the world, the food consumed will tend to be of a higher quality.
To explore how you can make the most of this trend, I’ve pulled together a list of 3 ASX companies that are exposed either directly or indirectly to our food consumption.
Tassal Group Limited (ASX: TGR)
Firstly we look to the oceans. Here we find Australia’s largest producer of Atlantic salmon – Tassal Group. However, Tassal also recently added tiger prawns to its portfolio of species stating a lower relative maintenance cost and greater earnings before interest, tax, depreciation and amortisation (EBITDA) $/kg compared to salmon. With this addition, Tassal looks set to take advantage of the growing demand for healthy Australian seafood. In fact, its domestic retail and wholesale segment accounts for 72% of sales, with the remaining 18% being exports.
Tassal is also growing sustainably with its FY19 harvest increasing by around 7% accompanied by revenue growth of 15.7%. It also offers investors a partially franked dividend yield of 4.2%.
Freedom Foods Group Ltd (ASX: FNP)
Freedom Foods Group owns a portfolio of high quality food brands such as Australia’s Own, Milk Lab, So Natural, Almond Breeze, Arnold’s Farm, Messy Monkeys and Vital Strength. And with 6 factories and over 150 products, the group hasn’t stopped looking for ways to make food better. In fact, Freedom also owns a ‘free from’ factory, which is one of just a few of its kind in the world. The factory is a facility that offers products that are ‘free from’ allergens such as wheat, rye, barley triticale and nuts.
With headquarters in Sydney, the company has a mission to make delicious and healthy food while leading this ‘free from’ movement. This is a niche in the market where Freedom looks to create offerings to consumers that address their health concerns. Freedom is seeing strong growth both here in Australia and overseas in China and South East Asia.
Rural Funds Group (ASX: RFF)
Our last company is linked to the food industry through its holdings in agricultural farmland. Rural Funds is a real estate investment trust specialising in farmland. This means it holds a portfolio of farmlands, feedlots, vineyards and poultry with the aim to provide investors with reliable income and growth. Rural Funds currently holds a diversified portfolio of 50 assets across varying types and climatic regions.
Providing investors with a forward dividend yield of 5.8%, Rural Funds’ earnings come from rental income. The group also boasts high quality tenants such as Treasury Wine Estates Ltd (ASX: TWE) and JBS Australia, Australia’s largest lot feeder and cattle processor.
Management has a stated goal of increasing the annual dividend by 4% each year, with credence to this goal given by Rural Funds’ 11.3 year weighted average lease expiry on its assets. I also think many of these assets will see an increase in demand over time, thanks to an increase in demand for red meat largely among developing nations and a growing move towards alternative milks.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Michael Tonon owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates Limited. The Motley Fool Australia has recommended Freedom Foods Group 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 Scott Phillips.
- Why the Nearmap share price and one other are on my buy list – June 13, 2020 10:30am
- Here’s why long term investing can outperform shorter holding periods – June 3, 2020 2:58pm
- 3 exciting ASX growth shares to buy next week – May 31, 2020 9:30am