Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Rural Funds diversifies dividend though latest purchase
The Rural Funds Group (ASX: RFF) share price is in focus after it announced acquisitions of multiple cattle and cropping properties.
Rural Funds (RFF) is a real estate investment trust (REIT) that owns farmland and leases to agricultural tenants. It is operated by Rural Funds Management Limited (RFM).
Rural Funds acquires cattle and cropping property
Management announced that Rural Funds has exchanged contracts to acquire farms with a total of 27,879 hectares of cattle and cropping. This is made up by four properties in central Queensland collectively named ‘Kaiuroo’.
Kaiuroo is around 5km away from an existing cattle property owned by RFF called ‘Cerberus’.
The purchase includes 12,448 megalitres of water entitlements. Management said that it plans to use the water entitlements to improve the productivity of the properties. Some of these plans include expanding irrigated cropping areas, pasture improvement and additional water points.
Financial details
Management said that a deposit of $17.2m is expected to be paid in November 2021 and is 25% of the purchase price. It will fund the deposit amount through RFF’s debt facility.
As an outcome of negotiating, management has an extended settlement period of up to 24 months. This will allow it to start the productivity developments and find a tenant before the purchase settles.
Management said that forecast FY22 adjusted funds from operations (11.8 cents per unit) and dividend distributions (11.73 cents per unit) remain unchanged.
Acquisition strategy
This acquisition is part of management’s strategy of acquiring assets that have the potential to improve productivity.
Earlier this month (November 2021) Rural Funds exchanged contracts to acquire cattle, cropping and macadamia properties. The purchase also included 20,733 megalitres of water entitlements, which management said are “currently under-utilised”.
Final thoughts on the Rural Funds share price
For existing shareholders it is good news to see Rural Funds continuing to expand and acquire more farming properties. The strategy of purchasing properties that have the opportunity of improved productivity will hopefully flow through to the bottom line in the coming years.
At the time of writing, the Rural Funds share price is sitting flat.
I’m interested in buying more Rural Funds shares, however I’m happy to wait for a cheaper entry price.
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