There are not many ASX dividend stocks I like more than Rural Funds Group (ASX: RFF). I think it's an excellent business for regular passive income.
The real estate investment trust (REIT) owns farmland across a variety of sectors, including almonds, macadamias, vineyards, cattle, and cropping.
As a diversification play alone, I think it's an interesting idea because agriculture is an important industry for Australia but there are not many ways on the ASX to gain exposure to farming.
But, Rural Funds doesn't have the operational risk of a farming business – that's on the reliable, blue-chip tenants instead. Let's take a look at how good the passive income could be for investors.
Passive income potential
The ASX stock does not pay a distribution every month, though it does pay cash out each quarter.
I think it's better to think of the goal as an annual total and then divide that amount into 12 equal amounts. Receiving $400 per month equates to $4,800 per year.
Rural Funds is expecting to pay an annual distribution of 11.73 cents per unit in FY26. That translates into a forward distribution yield of around 6%. I think that's a solid payout considering the RBA cash rate has been cut multiple times this year.
To receive $4,800 per year, we're talking about 40,921 Rural Funds shares. Even receiving $1,000 or $2,000 per year would also be a good level of passive income from this business.
Why this is a good time to invest in the ASX dividend stock
I think it's a good idea to buy asset-heavy businesses for less than they're worth.
Rural Funds owns a portfolio of farmland, as well as loans, cash, and various other assets and liabilities. This is all measured in the (adjusted) net asset value (NAV) figure. Rural Funds' NAV is adjusted to take into account the market value of the water entitlements it owns for tenants to use.
At 30 June 2025, the business had an adjusted NAV of $3.08. At the time of writing, it's valued at a discount of around 35% to its underlying value, which is large.
The business continues to benefit from ongoing rental growth thanks to a mix of lease indexation mechanisations (annual increases that are fixed or linked to inflation), as well as market reviews.
Another positive with this business is the long-term rental contracts, locking in a lot of income for the coming years. It had a weighted average lease expiry (WALE) of 13.9 years, which is reassuring for long-term investors.
I think this is a great time to buy this ASX dividend stock and own for many years into the future.
