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- Double-bullish on farmland
-
16% gains in one year with
farmland - Buy an acre for $638
My supervisor tells me that a good dividend story sells
newsletters. Here at Wyatt Investment Research, we like to sell newsletters
because we believe we have some of the best financial research in the
business. If you become a subscriber to one of our paid services, I think
you’ll be happy. Happy, paying subscribers let me write this free letter, so
we all win.
Right now, my colleague Tyler Laundon and I are currently
working on a special report on two of the best and highest paying small cap
dividend stocks.
I hope to get some information about this report in front of
you later this week, but in the meantime, I’ve found a commodity stock that
satisfies my curiosity and interest in farmland – and it also happens to pay
a dividend.
Before I reveal the
name of this stock, I want to point out that buying a company with farmland
in the mix is a great diversification play – and doubly so when it pays a
dividend.
That’s because when you buy this type of company, you’re
getting exposure to the continued profitability of its underlying farm
business, but you’re also buying actual farmland that the company owns – and
if you’ve been reading this letter, you probably know that I’m extremely
bullish on farmland prices.
I also happen to be bullish on the commodities that grow on
farms; corn, wheat, sugar, cattle, pigs, chickens, etc.
The dividend is just a small bonus, but I know there are
readers out there interested in income, so it’s worth a mention – even though
it’s only a 2% annual yield.
The value of farmland is not something you’ll find by
looking at a stock chart or a PE ratio. But it’s an important asset. It acts
as a paperweight on the underlying value of the company, no matter what
happens to its profitability.
Reader Sarah L. recently wrote in to tell me about farmland in Cass County
Illinois. According to Sarah, prices are on the rise,
with the acreage selling for 16% more than it was at
this time last year.
That’s one small example. A story on August 16 of this year
in the Kansas newspaper the Wichita Eagle backs up Sarah’s claim:
“Farm
land prices rise as demand increases
The gains came from strong demand from farm and non-farm
buyers and a limited supply of land for sale, even though lower crop prices
during the spring trimmed farm incomes.”
The company I’m about to reveal currently has 1.2 million
acres of productive farmland. That acreage is spread over 25 different farms,
and produces a variety of agricultural products: corn, wheat, sorghum,
soybean, sunflower, beef cattle and milk.
Buying one share of this company gives you ownership of 2.4%
of an acre – or a plot of farmland about 100 feet square.
With the company’s
stock price currently hovering above $15, it would cost about $638 to buy
enough shares to equal one acre of farmland that this company owns. I don’t
have to tell you that $638 is dirt cheap for one acre.
But buying $638 worth of shares gets you the farmland with
the farm businesses thrown in for free. Oh, and you get the 2%
dividend.
If farmland continues to rise in price, along with
commodities, you get double the upside.
Enough teasing, the company is Cresud Inc. (Nasdaq:
CRESY).
It’s a small-cap company with a market cap of about $750
million. I’d recommend picking up shares of this company under $17. That
still gives you the farm for a reasonable price – plus the business for
free.
What’s the catch? The company is headquartered in Buenos
Aires, Argentina, and most of its farmland is in Brazil. That’s not
necessarily a bad thing: Brazil is famously one of the most farm-friendly
countries in the world. It’s also a growth center, and is quickly becoming a
bread basket to compete with the American mid-west.
I think the company’s location is a plus, but as always, I
suggest you do your own homework to see if this opportunity is right for
you.
If you have any favorite agriculture investments, please
continue to send them my way. I read every message, though I’m not always
able to reply to each one.
Good investing,
Kevin McElroy
Editor
Resource Prospector
Kevin McElroy
Editor
Resource Prospector
P.S. Be on the lookout for the small cap dividend report I’m
working on. It’s about two companies with dividends over nine percent, and
the built-in upside inherent to smaller firms. It should be ready in the next
few days.
disclosure: no positions