The ASX dividend stock Rural Funds Group (ASX: RFF) is an incredibly underrated passive income idea. When you put its positives together, it has a decent claim to be one of the best options on the ASX.
It's not a famous business, but it gives exposure to one of the most important industries in Australia – farmland.
This is the only business on the ASX that focuses on owning farms and leasing them out, so it's very attractive to gain a piece of that asset base.
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Great farm portfolio
The business is invested across a number of farming assets, including almonds, cattle, macadamias, cropping, vineyards and more.
Rural Funds has locked in rental income for an extremely long time. In the FY26 half-year result, the business reported its weighted average lease expiry (WALE) was 13.2 years. Not many businesses have locked in their income that far in advance. Impressively, a large chunk of macadamia leases have been signed to FY64.
It has a number of large, high-quality tenants including Olam, JBS, Select Harvests Ltd (ASX: SHV), Stone Axe, Australian Agricultural Company Ltd (ASX: AAC) and Treasury Wine Estates Ltd (ASX: TWE).
I like how the ASX dividend stock regularly invests in its farming portfolio to improve the underlying value of the farm and increase its rental potential. Currently, it's developing macadamia orchards.
Good passive income
Despite the challenges of higher interest rates, the business has been able to deliver investors a consistent level of passive income.
In the last few years, Rural Funds has given unitholders 11.73 cents per unit, annually.
It's expecting to pay an annual distribution per unit of 11.73 cents in FY26, translating into a potential distribution yield of 5.75%.
Considering interest rates are rising again, I wouldn't be surprised if the business pays another 11.73 cents per unit in the 2027 financial year. That would be another distribution yield of 5.75%.
Excellent discount
What's a good price to pay for this business?
It's hard to know what a property is worth unless you actually go to sell it.
Rural Funds regularly tells investors about what its underlying value is, called the adjusted net asset value (NAV). It's 'adjusted' to take into account the market value of the water entitlements.
The ASX dividend stock reported its adjusted NAV was $3.10 at 31 December 2026, meaning it's currently trading at a discount of around 34%, which is a great value to buy at.
