Rural Funds Group (ASX: RFF) announced it has spent another $32.4 million on an asset to improve its portfolio.
Rural Funds describes itself as a REIT that owns a diversified portfolio of Australian agricultural assets which are leased predominately to corporate agricultural operators. It targets distribution growth of 4% per annum and improving farms that are leased to good counterparties.
What has Rural Funds acquired?
Rural Funds revealed it has exchanged contracts with Sunwater Limited to buy 21,600 ML of medium priority Lower Fitzroy River water allocation for $32.4 million.
The water will be sourced from the Rookwood Weir, which is being constructed 66km south-west of Rockhampton. The allocations, and 5,963 ML of additional Fitzroy River allocations previously acquired, will be applied to the development of up to 2,500 hectares of macadamia orchards and development of irrigation for cropping and cattle production.
A deposit equal to 10% of the purchase price is payable in instalments within 18 months of the execution of the contracts. The balance will be payable following the completion of several conditions precedent including successful commissioning of the Rookwood Weir Project. Rural Funds expects to complete the deal in 2023.
Is it a good ASX share?
Rural Funds was one of a limited number of ASX dividend shares to increase their dividend during the sketchy part of the COVID-19 lockdowns part of 2020.
If you don’t mind paying a fairly sizeable premium to the Rural Funds adjusted net asset value (NAV) (adjusted for the market value of water), then Rural Funds has a decent starting yield with good, consistent growth of the distribution. It offers a FY21 yield of 4.4%.
Another business that could be good for dividends is Brickworks Limited (ASX: BKW) which is more diversified.
