I'd describe Rural Funds Group (ASX: RFF) as one of the most attractive high-yield ASX dividend stocks Aussies can buy. For me, it's more appealing than the Age Pension.
Rural Funds Group is a real estate investment trust (REIT) that owns hundreds of millions of dollars of farmland across Australia. Its farms are spread across a number of farming areas, including cattle, almonds, macadamias, vineyards and cropping.
If I were thinking about an investment in retirement, owning farmland does sound appealing. Land always has value, it can produce something extremely essential to the population (food) and long-term inflation can be a useful tailwind to rental income.
Just to clarify, Rural Funds itself isn't a farming operator, it just leases its land to high-quality tenants.
I think it offers a number of benefits for investors.
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Strong rental income credentials
Rural Funds generates excellent rental income from tenants like Olam, JBS, Select Harvests Ltd (ASX: SHV), Stone Axe, Australian Agricultural Company Ltd (ASX: AAC) and Treasury Wine Estates Ltd (ASX: TWE). These businesses are among the leading operators nationally or even internationally.
Pleasingly, most of its rental income is steadily growing, with most contracts either being linked to CPI inflation, or having fixed annual increases, plus market reviews. This steady growth can help increase distributions organically in the coming years.
Additionally, I like that the rental income comes from a variety of areas, in different states and climate conditions.
Finally, the business has a weighted average lease expiry (WALE) of approximately 13 years, giving investors clear rental stability and visibility.
Why I think it's more appealing than the Age Pension
To get a huge amount of passive income, you'd need to buy a lot of Rural Funds shares. I think it's important to have diversification when it comes to a dividend portfolio.
But, I'd like to own Rural Funds shares because of the huge asset backing it would provide. That asset base can also climb in value over time, which can help boost our financial position.
Rural Funds has been paying an annual distribution per unit of 11.73 cents amid the headwinds of higher interest rates. That translates into a distribution yield of 5.7%. That makes it a high-yield ASX dividend stock, in my view.
The Age Pension currently pays a maximum of around $31,200 for a single person, which is one of the most generous in the world.
To receive that much from Rural Funds, an investor would need to own 265,985 Rural Funds shares.
Again, I wouldn't make Rural Funds my entire portfolio, though I'd be happy with exposure to this pleasing REIT as my 'farm' investment because of how passive it can be.
It looks like a great time to invest because, at the time of writing, it's trading at a discount of around 34% to its adjusted net asset value (NAV). In other words, we're able to get exposure to these farms for a very cheap price.
However, Rural Funds is not the only ASX share I'd buy for passive income today.
