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Farmland as an asset class makes for a great investment. You may have heard a statement such as “Buy land, they don't make it anymore.”
With consistent demand for food and other crops, Farmland is able to provide steady returns over time. It's also an investment with low correlation to the stock market.
You may be asking how you can get involved with a farmland investment. In this article, we review Farmland Partners (FPI) REIT.
As an REIT, it trades on the same exchanges as stocks giving you a high level of liquidity. This makes it one of the easiest ways to gain exposure to farmland. The alternative is buying a farm outright or participating in a crowdfunded farmland opportunity.
Another key benefit of an REIT investment is the dividends. More on this later!
However, publicly traded REITs do come with a few downsides:
- Since they trade on the same exchanges as stocks, they are susceptible to the same ups and downs. Publicly traded REITs are heavily correlated with the stock market.
- Often times, these REITs underperform private or less liquid real estate investments.
Nonetheless, should you be interested, there are a number of things you should know about Farmland Partners (FPI).
What Is Farmland Partners (FPI)?
Farmland Partners Inc is a publicly traded real estate investment trust. The company owns high quality farmland throughout North America and is looking to acquire more. In fact, Farmland Partners is the largest farmland REIT in the US by total acreage.
Investors in the trust are collectively helping address the growing demand for food, feed, fiber and fuel.
Farmland Partners works directly with their tenants to help them lower costs and improve their farms to maximize profitability. This also helps mitigate the risk of default, as investors are collectively the landlord.
As of November 2022:
- Farmland Partners Inc owns approximately 190,000 acres of land
- This is across 18 different states in the US
- The land is currently being farmed by over 100 tenants
- These tenants are collectively growing 26 different major commercial crops
Right off the bat, investing in a portfolio of farmland versus one individual farm is going to give you the benefit of diversification. Spreading out exposure across multiple geographies and crops helps mitigate many of the unique risk factors related to farming.
Invest In Farmland Today!
|$8,000+||View Investments||Yes||US Farmland, Timberland, Vineyards|
|$15,000+||View Investments||Yes||US Farmland|
|$30,000+||View Investments||No||South American Farmland|
One of the common complaints investors have about REITs is the lack of transparency. Simply put, it can be difficult at times to determine what you are actually owning.
With Farmland Partners, you can actually go to their site and view a map of their farms. In fact, you can click on each state and find the actual farms you are investing in.
While they do not have as much data as other farmland investments such as AcreTrader, it is definitely better than most REITs.
All REITs are required to pay out dividends to shareholders, and Farmland Partners is no exception.
- Farmland Partners currently pays a quarterly dividend in the amount of $0.05 per share
- However, back in 2018 they used to pay a dividend of $0.1275 per share
- The dividend has decreased significantly
- Based on the share price of $13.71, they are currently paying a dividend yield of 1.60%
A few years ago, Farmland Partners was under a short seller attack. Often times, large hedge funds try to manipulate share prices with short selling and other techniques.
After their IPO and trading at around $13 per share, the stock fell as low as $4.50 per share in 2018.
Now, the stock is trading around $14 per share.
Revenue And Gross Profit
Investors should be aware that Total Revenue and Gross profits have essentially remained flat over the years.
- 2018: $56,069,000
- 2019: $53,564,000
- 2020: $50,689,000
- 2021: $51,739,000
- TTM: $59,433,000
- 2018: $48,235,000
- 2019: $44,740,000
- 2020: $39,952,000
- 2021: $42,883,000
- TTM: $46,971,000
Is Farmland Partners (FPI) A Buy?
Before investing in this REIT, investors should be well aware of the flat revenue and gross profit as well as the reduction in the quarterly dividend.
The stock is trading at nearly a 5 year high, which could be attributed to the increased awareness of farmland as an asset class. Billionaires like Bill Gates have been buying farmland left and right, making it a trendy investment all of the sudden.
FPI provides investors with high exposure to farmland without the downside of low liquidity and high operational costs of running a farm. On the other hand, because it is traded like other stocks, it is still susceptible to the ups and downs of the stock market.
While REITs are the easiest way to gain exposure to farmland, they are not the only way. Check out our article on the best farmland investing platforms for more options.