Gladstone Land Corporation: Profit From Farmland And Vineyards With This Monthly Dividend Stock

There is plenty of room for future M&A activity.

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LAND Acquisitions

Source: June 2017 Investor Presentation, page 15

The U.S. farmland industry is highly fragmented, with significant family ownership. This means the environment for continued acquisitions remains fertile for LAND.

Thanks to acquisitions, LAND is off to a good start to 2017. Adjusted FFO-per-share increased 1% in the first quarter, and 1.7% in the second quarter, due to higher rental income from recent acquisitions.

Valuation & Expected Total Returns

In the past four quarters, LAND generated adjusted FFO-per-share of $0.561. As a result, the stock trades for a price-to-FFO ratio of 22.7. The stock does not seem to be undervalued.

That said, it is a high-quality business that investors should expect to trade for a premium valuation multiple. On a per-share basis, the company had an estimated net asset value of $14.46 per share last quarter.

This means LAND trades at a slight discount to its NAV, of about 12%.

Going forward, future returns will be generated by FFO growth and dividends. A potential breakdown of future returns is as follows:

  • 4%-6% FFO growth
  • 4% dividend yield

Long-term FFO growth of 4%-6% is attainable for LAND. Growth over the first two quarters of 2017 has hovered around 1%, but LAND is coming off a very good year in 2016.

In addition to FFO growth, investors will collect a 4.2% dividend yield, based on the current share price and dividend payout. As a result, total returns could reach 8%-10% annualized.

Dividend Analysis

Not surprisingly, LAND’s dividends will make up a significant portion of total future returns. This is fairly typical for a REIT.

LAND currently pays a monthly dividend of $0.044 per share. The annualized payout of $0.528 per share, represents a current dividend yield of 4.2%.

LAND has a good dividend track record. Since it went public in January 2013, it has paid over 50 consecutive monthly dividends to shareholders. It has also increased its dividend seven times.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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