The All Ordinaries (ASX: XAO), or All Ords ASX shares, I'm about to write about are ones that look very interesting to me in the current conditions.
I'm always on the lookout to buy ASX shares when it looks like it's the right time to invest.
The market declines seen in June and October last year seemed like excellent times to invest in names that had fallen heavily such as retail and technology. There has been a rebound for a number of names involved since.
However, with what's happening, I think these two All Ords ASX shares are looking like compelling ideas to boost my existing holdings.
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Duxton Water Ltd (ASX: D2O)
Duxton Water is a business that owns water entitlements in Australia. It uses this portfolio to provide "flexible water solutions" to Australian farmers, such as long-term entitlement leases, forward allocation contracts and spot allocation supply.
La Nina has led to significant rainfall in recent times, with floods affecting several areas. However, La Nina is expected to end by the end of summer, according to Duxton. The company points to the Bureau of Meteorology forecasting a possible shift to El Nino conditions by June 2023, which usually brings drier than average conditions to the east of Australia.
This prospect of drier conditions is reportedly leading to increased demand for leases and forward contracts for Duxton.
Duxton Water can benefit from both the water lease income, as well as capital gains of the value of its water portfolio over time.
At the end of December 2022, excluding tax provisions for unrealised capital gains, it had a net asset value (NAV) of $2.22. Compare that to the Duxton Water share price, which is currently at a discount of around 25% to that NAV value.
It has also guided its final 2023 dividend and interim 2024 dividend to be a total of 7.3 cents, suggesting a future grossed-up dividend yield of 6.3%.
Rural Funds Group (ASX: RFF)
Rural Funds is also a potential ASX All Ords share investment in the agricultural space. It's a real estate investment trust (REIT) that owns a variety of farms across Australia. Some of the categories include cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).
The Rural Funds share price has fallen by 25% since the end of 2021 and it's down 7% since 3 February 2023.
It's understandable that the REIT has fallen. Higher interest rates are theoretically meant to hurt asset values, like farms. The higher interest rates could also mean a larger interest expense cost.
But, the REIT's growing rental income can offset some of this pain, with some rent being linked to CPI inflation, which is currently elevated.
I like the defensive nature of high-quality REITs, with regular rental income. Rural Funds has some of the biggest agricultural names as tenants such as Australian Agricultural Company Ltd (ASX: AAC), Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Ltd (ASX: SHV) and Olam.
The All Ords ASX share aims to grow its distribution to investors by 4% per annum. Aside from the natural rental growth each year, it aims to boost income by changing land to a 'higher and better use' (such as converting to tree nuts) and also improving the productivity of land for tenants, such as increased water access.
Based on the guided total distribution per unit of 12.2 cents in FY23, that amounts to a distribution yield of 5.1%.
