Monthly Dividend Stock In Focus: Gladstone Land

Updated on February 27th, 2023 by Samuel Smith

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 208 publicly-traded REITs in the Sure Dividend database. You can see all 208 REITs here.

Gladstone Land has a dividend yield of 3.2%, which is not the highest yield around, especially for a REIT. On the positive side, the trust pays its dividends each month, rather than each quarter, and the yield is still meaningfully higher than what the S&P 500 offers.

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.

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 roughly 160 farms, comprising over 110,000 acres of farmable land. Gladstone’s business is made up of three different options available to farmers, all of which are done on a triple–net basis.

Related: Agriculture stocks list and analysis

The trust offers long–term sale-leaseback transactions, traditional leases of farmland, and outright purchases of farm properties.

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 fourth-quarter Fiscal Year 2022 earnings on February 21st, 2023. Gladstone Land reported Q4 net income of approximately $1.1 million, which was lower than approximately $1.8 million in the previous quarter. The net loss to common stockholders was approximately $4.8 million, or $0.14 per share, compared to approximately $3.6 million, or $0.10 per share, in the prior quarter. AFFO for the quarter was approximately $6.8 million, or $0.19 per share, compared to approximately $7.2 million, or $0.21 per share, in the prior quarter. The common stock dividend declared was approximately $0.137 per common share for both quarters.

The total cash lease revenues increased by approximately $668,000, mainly due to participation rents of approximately $4.7 million, versus approximately $3.0 million in the previous quarter. However, the fixed base cash rents decreased by approximately $1.0 million, mainly because of the write-off of approximately $939,000 in aggregate straight-line rent receivable balances associated with six leases to two separate tenants.

The aggregate related-party fees increased by approximately $1.1 million from the prior quarter, primarily driven by a higher incentive fee earned by the investment adviser in the current quarter. Excluding related-party fees, the recurring core operating expenses decreased by approximately $240,000 from the prior quarter, primarily due to lower property-operating expenses and general and administrative costs.

The cash flows from operations for the current quarter increased by approximately $17.0 million over the prior quarter, mainly due to the timing of when certain rental payments are scheduled to be paid pursuant to their respective leases. The estimated NAV per share increased by $0.52 from the prior quarter to $17.08 at December 31, 2022, primarily driven by the accretive impact of common equity issuances and valuation increases in certain farms that were re-appraised during the fourth quarter.

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 the 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 who 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 as there is plenty of room for future M&A activities.

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 that said, 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.

We expect adjusted FFO/share growth of 7% per year over the next five years.

Dividend Analysis

Gladstone Land currently pays a monthly dividend of $0.0459 per share. The annualized payout of $0.5508 per share represents a current dividend yield of 3.2%.

Gladstone Land has a good dividend track record. The company has paid consecutive monthly dividends since its initial public offering in January 2013 and has increased its dividend every year.

Most importantly of all, the company’s adjusted funds from operation are currently covering the dividend payouts quite easily and are expected to continue doing so for the foreseeable future.

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 3.2%, with the potential for dividend increases at a rate above inflation over time. Overall, Gladstone Land is an attractive monthly dividend stock, despite having a relatively low yield.

If you are interested in finding more high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:

The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: