Rural Funds Group (ASX: RFF) is one of the most appealing ASX dividend stocks that Aussies can buy, in my view.
It's not a huge business, but the asset exposure it provides is particularly compelling.
It's a real estate investment trust (REIT) that owns farmland, which is quite a different area of the economy from industries such as banking, mining or retail, which are popular picks for dividends.
There are a few reasons why I think it's particularly attractive, which I'll dive into below.
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Diversification
The business has a diversified portfolio of farming assets, spread across different states and climatic conditions. Diversification for our portfolios is helpful.
It's particularly compelling how the ASX dividend stock owns different types of farms within its own portfolio including almonds, macadamias, vineyards, cattle and cropping.
Diversification helps reduce risks and allows the business to search for opportunities across a wider range of assets.
Long-term rental income
One of the most appealing features of this business is that it has long-term rental contracts agreed with tenants like Select Harvests Ltd (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE).
Long-term rental contracts provide pleasing visibility and locks in significant rental profits for the years ahead.
At 30 June 2025, it had a weighted average lease expiry (WALE) of 13.9 years, which I'd describe as a long time, one of the longest in the REIT sector.
Rental growth for the ASX dividend stock
Another key reason to like the ASX dividend stock is its regular rental growth.The business is benefiting from organic growth with its rental contracts.
Rural Funds has annual indexation with most of its tenants, with the increases in the contracts either linked to inflation or the rises are at a fixed pace.
While the rises aren't huge, it's a significant tailwind for rising rental profits, which is in turn a driver of higher distributions over time.
Strong yield
Every good ASX dividend stock needs to have a solid dividend yield, otherwise it's not an appealing option for passive income.
The business expects to pay a distribution of 11.73 cents per unit in FY26, which translates into a distribution yield of approximately 6%.
I think that's a very appealing starting yield and I'm expecting distribution growth in the coming years, particularly with the tailwind of lower interest rates, which could help lower interest costs.
RBA rate cuts could also help increase the valuation of the farming properties, there could be at least one more rate cut over the next 12 months.
