Three companies have found both growth and income in some of the most rural parts of this country. They found growth by simply looking around and seeing the vast amounts of farmland that increases an average of 6% per year. They found income in the payments that farmers would make to landowners to lease that farmland during the growing season. These two things together have made a lot of landowners very wealthy over the years. And now these three companies are making that growth and income available to anyone.
Gladstone Land Corporation, an externally-managed agricultural real estate investment trust, owns and leases farmland to corporate and independent farmers in the United States. The company’s farms allow its tenants to grow row crops, such as lettuce and tomatoes; and berries comprising strawberries and raspberries. As of December 28, 2015, it owned 43 farms covering an area of 16,810 acres located in 6 states across the United States. The company also leases a parcel on its farm near Oxnard, California to an oil company. Gladstone Land Corporation was founded in 1997 and is based in McLean, Virginia.
(Summary) (Company) (Chart)
| 3 January 2016 Price $8.65 1yr Target $12.80 Analysts 5 Dividend $0.48 Payout Ratio 1600% 1yr Cap Gain 47.97% Yield 5.54% 1yr Tot Return 53.51% | EPS (ttm) $0.03 EPS next yr $0.13 EPS next 5yr 10.00% 1yr Price Support $1.30 P/E 288.33 PEG 28.83 Beta --- Market Cap $86.50 Mil Revenues $10.80 Mil Earnings $0.30 Mil Profit Margin 2.77% | 1yr EarnGR --- 3yr EarnGR --- 5yr EarnGR --- 1yr DivGR 200.00% 3yr DivGR --- 5yr DivGR --- Quick Ratio --- Current Ratio --- Debt/Equity 1.97 ROA 0.20% ROE 0.50% |
Farmland Partners Inc., a real estate company, owns and seeks to acquire primary crop farmland located in agricultural markets throughout North America. As of November 30, 2015, it owned 253 farms with an aggregate of 104,742 acres located in Arkansas, Colorado, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, and Virginia. The company was founded in 2013 and is based in Westminster, Colorado.
(Summary) (Company) (Chart)
(Summary) (Company) (Chart)
| 3 January 2016 Price $10.97 1yr Target $12.58 Analysts 6 Dividend $0.51 Payout Ratio % 1yr Cap Gain 14.67% Yield 4.64% 1yr Tot Return 19.31% | EPS (ttm) $-0.02 EPS next yr $0.27 EPS next 5yr --- 1yr Price Support $--- P/E --- PEG --- Beta --- Market Cap $131.42 Mil Revenues $10.60 Mil Earnings $0.00 Mil Profit Margin 0.00% | 1yr EarnGR --- 3yr EarnGR --- 5yr EarnGR --- 1yr DivGR --- 3yr DivGR --- 5yr DivGR --- Quick Ratio --- Current Ratio --- Debt/Equity 1.74 ROA 0.00% ROE -0.10% |
American Farmland Company, a real estate company, owns and operates a portfolio of farmlands in the United States. The company operates through four segments: Permanent Crop, Specialty/Vegetable Row Crop, Commodity Row Crop, and Development. The Permanent Crop segment consists of Kimberly Vineyard, Golden Eagle Ranch, Quail Run Vineyard, Blue Heron Farms, and Falcon Farms properties with an aggregate of 3,069 tillable acres and 3,882 gross acres. The Specialty/Vegetable Row Crop segment includes Sandpiper Ranch and Sweetwater Farm properties with an aggregate of 1,608 tillable acres and 1,808 gross acres. The Commodity Row Crop segment comprises Pleasant Plains, Macomb Farm, Kane County Farms, and Tillar Farms with an aggregate of 4,446 tillable acres and 4,726 gross acres. The Development segment consists of Blue Cypress Farm, Roadrunner Ranch, Condor Ranch, Grassy Island Groves, Pintail Vineyards, and Hawk Creek Ranch properties, with an aggregate of 3,487 tillable acres and 4,962 gross acres. The company leases its farms to professional farmer tenants under various lease structures with staggered durations, including fixed and participating leases. The trust qualifies as a real estate investment trust for federal income tax purposes. American Farmland Company was founded in 2009 and is based in New York, New York.
(Summary) (Company) (Chart)
(Summary) (Company) (Chart)
| 3 January 2016 Price $7.04 1yr Target $9.50 Analysts 7 Dividend $0.25 Payout Ratio 500% 1yr Cap Gain 34.94% Yield 3.55% 1yr Tot Return 38.49% | EPS (ttm) $0.05 EPS next yr $0.27 EPS next 5yr N/A 1yr Price Support N/A P/E 140.80 PEG --- Beta --- Market Cap $141.93 Mil Revenues $9.40 Mil Earnings $0.60 Mil Profit Margin 6.38% | 1yr EarnGR --- 3yr EarnGR --- 5yr EarnGR --- 1yr DivGR --- 3yr DivGR --- 5yr DivGR --- Quick Ratio --- Current Ratio --- Debt/Equity 0.51 ROA 0.40% ROE 0.70% |
My Perspective
I own stock in each of these three companies and continue to add to those positions as often as I can through the use of dividend reinvestment, option selling, and direct purchases in the open market. I believe these companies are great companies and obvious investments if bought at beneficial prices.
The central idea behind the American Farmland Company was to accumulate and then to lease farmland. The founders noted that U.S. farmland property values generally increase over the long term while having lower than historical debt to equity and debt to asset ratios. They have also risen during both increasing and decreasing interest rate environments. This historical perspective is expected to increase in the future as well.
With less debt, farmland has been and may be more resistant to interest rate changes, credit shocks and financial recessions. And more specifically and timely, during the financial crisis of 2008, the NCREIF Farmland Index generated robust gross cumulative gains while the S&P 500 Index and the MSCI World Index generated substantial losses.
As a result, I am completely convinced that any investment in these companies is a great investment but it has to be entered into as a long term investment. And by long term I mean years, not months. Anyone with a shorter term horizon will most likely become disillusioned and/or disappointed in the short term. That said, this may just be one of the best investments of the decade if executed correctly (a big if!). Land traditionally increases in value at a rate similar to the inflation rate so it's a great preserver of purchasing power over time, much like gold is. In addition, as population encroaches on today's farm land, the value of the land increases almost exponentially as its use in converted into lots for homes, businesses, golf courses, etc. And while an investor waits for the value of the land (stock) to increase, each of these companies is throwing off a very generous dividend.
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