1 ASX dividend stock down 30% I'd buy right now
The Rural Funds Group (ASX: RFF) share price has dropped 30% since December 2021, as the chart below shows. The ASX dividend stock could be a great buy today, in my view.
Rural Funds is a real estate investment trust (REIT) that owns farmland across Australia. It has a diversified portfolio across different food segments such as cattle, almonds, macadamias and cropping.
Rising interest rates have been the main driver of this decline. But I believe this decline gives investors a good entry point to invest.
Strong distribution
Rural Funds is one of the few REITs to give investors a very reliable distribution over the past decade.
Despite periods of higher interest rates, Rural Funds hasn't given unitholders a reduction to its cash payout since it first started making payments in 2014.
The ASX dividend stock increased its payout each year between FY14 and FY22 and has maintained its payout each year since FY22. This is admirable considering many other REITs have been forced to reduce their payouts amid higher interest rates.
I think it's likely the business will pay an annual distribution per unit of 11.73 again in FY27. That translates into a distribution yield of 5.3%. I'd say that yield is very competitive with the best term deposits out there right now.
Growing rental income
One of the best reasons to like this ASX dividend stock is because the business has rental growth contracted into its leases.
A majority of its rental income benefits from being linked to inflation, while close to a third of the rental income grows due to fixed annual increases.
The rental increases provide a steady drum beat of organic growth for the business, which can help fund passive income growth in the coming years.
Rural Funds also effectively invests in improving its farms, boosting their productivity, rental income, and underlying value.
Big discount to its underlying value
I think the business is very attractively priced considering it's trading at a large discount to the underlying value.
REITs report their underlying value through the net tangible asset (NTA) or net asset value (NAV) figure. That tells investors what the net figure of the assets minus the liabilities is. If an investor wanted to buy the entire Rural Funds business, they'd probably have to pay at least the NAV figure to get the deal over the line.
Rural Funds reported an adjusted NAV of $3.10 as of 31 December 2025 and recently announced it was selling a few farms for a premium to their stated worth. So, I think we can be reasonably confident about the Rural Funds NAV.
The Rural Funds unit price is trading at a 28% discount to its underlying value, so I think this is a great time to invest. But it's not the only ASX dividend stock I've got my eyes on.
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Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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