Best Farmland REITs for Agricultural Investment
By: Adam Johnson,
Best farmland REITs for agricultural investment show how to invest in agriculture without owning a farm.
Farmland is one of the best ways to hedge against inflation, since land value tends to increase when consumer prices rise. It is also an uncorrelated asset, which means it does not follow stock market trends. This provides an excellent way for making a portfolio recession-resistant.
However, investing directly in farmland can cost a lot of money and require a good amount of agricultural knowledge. It is also an active investment because an owner will have to devote the time and energy to cultivate the land or manage tenants, if rented out. If these are barriers to entry for you, then the best farmland REITs can be a great way to gain easy, passive exposure to farmland at a lower price.
Best Farmland REITs for Agricultural Investment — What is a farmland REIT?
A farmland REIT is a real estate investment trust (REIT) invested in a diversified farmland portfolio. These farmland REITs usually hold various types of property across a range of states. The land is rented to farmers. An investor can buy shares in a farmland REIT similar to buying shares in a company on the stock market.
As the value of the REIT’s land holdings goes up, so does the price of your shares, meaning capital appreciation on your investment. In addition to these returns, you can also earn dividends on farmland REITs thanks to the rental income they receive. Farmland REITs offer one of the best ways to invest in farmland without actually purchasing land, along with agriculture exchange-traded funds (ETFs) and crowdfunding platforms like FarmTogether.
Best Farmland REITs for Agricultural Investment – Gladstone Land Corporation
Gladstone Land Corporation (NASDAQ: LAND) is a farmland REIT that was formed in 1997 and now owns holdings in 150+ farms across 14 different states. Its primary holdings are fruit and produce farms that cost between $2 million and $40 million. The total market capitalization of LAND is $546.7 million, making it the largest farmland REIT in the world.
LAND is offering a dividend yield of 3.59%, which is comparable to other farmland investment options. In addition, over the last five years, LAND has appreciated about 20.53%. This has yielded respectable returns for LAND investors over the past few years.
Best Farmland REITs for Agricultural Investment – Farmland Partners Inc.
Farmland Partners Inc. (NYSE: FPI) is the second-largest farmland REIT by market cap, with holdings that comprise approximately 157,000 acres spread across 16 different states. Farmland Partners’ 100 farmland tenants grow 26 major commercial crops aimed at filling the demand for food, fuel, fiber and feed.
The company’s leaders call the United States the world’s most attractive agriculture market to invest in. FPI has significant potential for rising productivity, decreasing farmland mass and increasing demand for food as bullish indicators for farmland.
Low overhead costs of less than 1% of assets and economies of scale have allowed FPI to proliferate. While the company has focused on core investments in high-quality, U.S. farmland, they are also selectively considering exceptional opportunities.
This REIT is up nearly 33% over the past five years and has a dividend yield of 2.15%, which is on par with other farmland REITs.
Best Farmland REITs for Agricultural Investment — The Bottom Line
Farmland can be a great way to diversify your portfolio beyond stocks and bonds. As a fairly secure uncorrelated asset, farmland can help investors build wealth during market downturns.
On average, the farmland asset class outperformed the stock market while experiencing far less volatility. Farmland is considered a good investment because it’s a necessity that is becoming more scarce as supply decreases.
Adam Johnson writes for www.dividendinvestor.com and www.stockinvestor.com.
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