Monthly Dividend Stock In Focus: Gladstone Land - Sure Dividend

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Monthly Dividend Stock In Focus: Gladstone Land


Updated on June 10th, 2021 by Bob Ciura

Gladstone Land Corporation (LAND) is a Real Estate Investment Trust. REITs are popular investments because they typically pay high dividend yields. Gladstone Land is one of 166 publicly-traded REITs in the Sure Dividend database. You can see all 166 REITs here.

Gladstone Land has an attractive dividend yield of 2.1%, which is not the highest yield around but it is still better than the ~1.4% average yield of the S&P 500 Index. In addition, the trust pays its dividends each month, rather than each quarter.

You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter like dividend yield and payout ratio) by clicking on the link below:

 

Gladstone Land is a unique REIT. Many REITs own physical buildings across various industries like retail or healthcare. Gladstone Land, however, owns farmland, as well as vineyards.

This article will discuss the trust’s prospects and why it could be a valuable stock for diversification and high dividend income.

Business Overview

Gladstone Land Corporation is a real estate investment trust, or REIT, that specializes in the owning and operating of farmland in the U.S. The trust owns 141 farms, comprising about 104,000 acres of farmable land. Gladstone’s business is made up of three different options available to farmers, all of which are done on a triplenet basis.

The trust offers longterm sale leaseback transactions, traditional leases of farmland, and outright purchases of farm properties. Gladstone’s portfolio has an appraised value of $1.2billion.

Triple-net leases are appealing as the trust receives a steady stream of rental income, while the tenants are responsible for real estate taxes, insurance, and maintenance expenses. Some of the trust’s leases also include a revenue-sharing component, based on the crops harvested on the farms.

The REIT has enjoyed strong portfolio metrics such as occupancy and rental income growth.

Source: Investor Presentation

Gladstone Land’s investment focus is primarily on fresh produce, which it believes is the group with superior long-term fundamentals.

Commodities tend to yield less for farmers, so lessors of the farmland also tend to earn less. Focusing on the best plots of land that are used for the most profitable crops is an advantage for Gladstone Land.

U.S. farmland has proven to be a very strong investment over many years, characterized by stronger returns and lower volatility than other real estate investments, and the S&P 500 Index.

Gladstone reported first quarter earnings on May 12th, 2021, with results coming in better than expectations on both the top and bottom lines. Gladstone reported core fundsfromoperations per share of $0.18, up 12.5% from the previous quarter.

Net asset value ended the quarter at $12.69 per share, up 3.8% from the December quarter. Growth was primarily driven by a decrease in the fair value of fixed longterm borrowings, which was the result of higher market interest rates. In addition, the trust issued common shares at above estimate NAV, which generated a further gain.

Growth Prospects

Gladstone Land has positive long-term growth prospects, because it stands to capitalize on two major long-term trends. The first catalyst is growth of the global population. The world population is around 7.5 billion, and strong growth rates are expected to continue.

This is a long-term tailwind for those that own farmland as a constantly-increasing population will need ever-increasing amounts of food.

At the same time, there is only so much land for farming. In fact, the supply of available farmland is actually decreasing in the U.S., as large amounts of farmland are converted to suburban use each year, for things like housing, schools, and offices.

The combination of falling supply and increasing demand has caused farmland prices to rise steadily for many years. As the supply and demand trends are not expected to reverse any time soon, Gladstone Land continues to have a strong future growth outlook.

Source: Investor Presentation

Future growth will be achieved through growth at existing properties, and by investing in new properties. For example, in the 2021 first quarter Gladstone Land acquired three new farms, consisting of 233 acres, for $5.6 million.

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

The U.S. farmland industry is highly fragmented, with significant family ownership. This means the environment for continued acquisitions remains fertile for Gladstone Land. Gladstone Land continues to make meaningful acquisitions, as seen above, and we believe this is a steady source of growth for the trust moving forward.

This strategy has led to a higher share count over time, with the above-mentioned significant dilution of 2019 as an example. But over time, acquisitions are key to the trust’s growth. Gladstone Land continues to pursue attractive acquisition opportunities, and there is little reason to think its growth will cease.

These fundamentals have led to long-term growth as measured by adjusted FFO, although growth has leveled off recently. Revenue has grown by ~9X since the IPO – in a period of just over six years – and adjusted FFO has nearly tripled in that time.

We expect adjusted FFO/share growth of 5% per year over the next five years.

Dividend Analysis

Not surprisingly, Gladstone Land’s dividends will make up a significant portion of total future returns. This, of course, is typical for a REIT. REITs are required by law to distribute at least 90% of income in the form of dividends to shareholders, which is why so many trusts offer a very high dividend.

Gladstone Land currently pays a monthly dividend of $0.045 per share. The annualized payout of $0.54 per share represents a current dividend yield of 2.1%.

Gladstone Land has a good dividend track record. The company has paid 100 consecutive monthly dividends since its initial public offering in January 2013, and has increased its dividend 22 times over the past 25 quarters.

Based on expected adjusted FFO-per-share of $0.65, Gladstone Land has a projected dividend payout ratio of 83%. This is an important signal that the distribution is covered by underlying adjusted FFO.

Final Thoughts

The rising global population and falling supply of available farmland in the U.S. set up a very favorable future for Gladstone Land. Supply and demand factors support continued farmland investment. This means Gladstone Land should be able to continue growing its FFO and dividend over the long term.

The trust pays an attractive dividend yield of above 2%, with the potential for dividend increases at a rate above inflation over time. Overall, Gladstone Land is an attractive monthly dividend stock.

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