Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Growing Your Profits With Farmland

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

China can't counterfeit it. The Federal Reserve can't print more of it. All of the land we have now is all of the land we will ever have. Farmland in particular is one of the most interesting types of land from an investing perspective. According to the NCREIF Farmland Index, farmland has had a positive total return every single year since the index was created in 1991. You will never find that level of consistency from the likes of the S&P 500.

Buying a few thousand acres of farmland is of course not feasible for the majority of us. Similarly, private investment vehicles for farmland ownership are generally limited to wealthy individuals. But within the public markets are a few American stocks that can give the average investor exposure to the opportunity that is farmland.

What's behind barn door No. 1?
One of the largest landowners in Florida, Alico (NASDAQ: ALCO  ) , and its nearly 140,000 acres, is also the largest of these publicly traded American farming plays. The company's biggest source of revenue is its citrus business dedicated primarily to the growing of oranges for juice. If you drink Tropicana, Minute Maid, or Florida's Natural, there is a fair chance that you have consumed some of Alico's oranges. In 2012, Alico grew, harvested, and handled about 3.8% of the entire U.S. orange production.

Over the next decade, however, Florida's citrus production is projected to remain mostly flat and competition from Brazilian-grown oranges will continue to increase. Due primarily to a decline in citrus sales, Alico's total operating revenue last quarter fell to $35.2 million compared to $40.4 million in the previous year. Although Alico's management believes there is a long-term opportunity to expand its citrus business, it remains to be seen if the company will be able to accomplish that goal given larger industrywide concerns.

When life gives you lemons
Located on the other side of the country, Limoneira (NASDAQ: LMNR  ) , with its 7,850 California acres, is also a grower of citrus crops. As the company's name might suggest, Limoneira is one of the largest growers of lemons in the United States, as well the single-largest grower of avocados in the U.S. If we play another game of "Name That Grower," you can thank Limoneira for that guacamole you had with your order at Chipotle Mexican Grill (it's one of Chipotle's "Food With Integrity" suppliers).

Unlike Alico and its Florida citrus business, Limoneira's California agribusiness has performed very well this year. The company's third-quarter lemon revenue increased to $19.1 million from $15.5 million during the previous year's third quarter. Similarly, the company's avocado revenue increased to $7.7 million from $5.5 million.

Overall, the company's third-quarter revenue grew by 21%. Even more impressive, the company's overall revenue for the nine months ending July 31 grew by 38.3% compared to last year. The company's stock reflects this outstanding performance, with shares shooting up nearly 35% year to date.

Pure-play ownership
A newcomer to the public markets, Gladstone Land (NASDAQ: LAND  ) is the smallest of the group, with slightly less than 2,000 acres of farmland. Much of that land is located in California (1,229 acres) and Florida (402 acres), but the company has been using the proceeds from its recent IPO to diversify geographically. It acquired a 119-acre farm in Michigan and a 209-acre farm in Oregon.

In contrast to Alico and Limoneira, Gladstone Land does none of the actual planting, harvesting, hauling, or marketing of crops itself. The entirety of Gladstone Land's business is the leasing of its farmland to others. Leasing the land to corporate and independent farmers on a triple net-lease basis (tenants being responsible for the taxes, insurance, and maintenance), Gladstone Land simply collects the rent and distributes the majority of the company's cash flow to shareholders. That distribution currently stands at a monthly dividend payment of $0.12, an annual yield of approximately 8.9%.

Foolish bottom line
Renowned 19th century author Mark Twain was once quoted as saying, "Buy land, they're not making it anymore." Genius in its simplicity, that bit of investing advice is as spot-on today as it was back in the 1800s. Farmland investing it not without its risks, but history has shown us that farmland is a great alternative to the stock market. With few opportunities available to the average retail investor, though, these three farmland stocks offer us the next best thing to direct ownership.

Don't miss out on profits
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 02, 2013, at 9:28 PM, Anysimplefool wrote:

    Just read this old article. One glaring gap in the write up is the land development piece. LMNR will soon begin residential home development with a partner. It is potentially a game changer. They also acquire water rights when they buy farm land. This allows them to sell excess water. Lots of talk about how water will be the next commodity to reach its peak, and begin to dramatically increase in value. All together, this is a very interesting stock. Also pays a small divi.


Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2679925, ~/Articles/ArticleHandler.aspx, 9/27/2016 11:43:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,157.08 62.25 0.34%
S&P 500 2,154.45 8.35 0.39%
NASD 5,284.12 26.63 0.51%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 11:26 AM
ALCO $27.25 Up +0.13 +0.48%
Alico CAPS Rating: No stars
LAND $11.13 Down -0.01 -0.04%
Gladstone Land CAPS Rating: ****
LMNR $18.68 Down -0.11 -0.59%
Limoneira CAPS Rating: No stars