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Farmland Partners hikes payout in drive to win over investors

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Farmland Partners revealed an 11% hike in its dividend in its latest effort to win over investors it believes are undervaluing its stock in the face of a downturn in US land values.

The group, which buys land with the aim of exploiting capital growth and rental income from farmers, unveiled a quarterly dividend of $0.116 per share, to be paid in January, up from its previous payout of $0.105 per share.

"The significant increase in our quarterly dividend reflects our commitment to deliver positive returns to our stockholders," Paul Pittman, the Farmland Partners chief executive said.

The group was continuing to "generate strong cash flow fuelled by the addition of high-quality assets to our portfolio", he said.

'Not reflected in the shares'

Indeed, the group on Monday unveiled its biggest deal yet since it floated in April, buying seven farms in South Carolina from one seller for $28m, equivalent to some $4,100 per acre all in.

The 6,819-acre deal, plus the $18m purchase of eight farms in Arkansas, Colorado and Nebraska from a range of vendors, takes the Farmland Partners portfolio to 48,600 acres – up more than 40,000 acres since the stockmarket flotation.

However, shares in the group, floated at $14.00 a share, have failed to win investor support, closing at $10.33 on Thursday, down 26% on the IPO price, and by 0.3% on the day, despite the dividend hike.

The group last month unveiled a $10m stock repurchasing programme, which Mr Pittman said "demonstrates our confidence in our ability to generate returns that are not reflected by our current stock price".

The buyback announcement came only three months after the group raised $46.5m from investors.

'Air out of the bubble'

The downturn in its shares come against a backdrop of a weakened US land market - undermined by the dent farm profitability from lower crop prices - with central bank data last week showing price declines in many major agricultural states.

Separately on Thursday, a monthly survey by Nebraska's Creighton University of land prices in top farming states showed values falling in November for a 12th successive month.

A Creighton index of farmland prices came in at 30.0, up from last month's record low of 20.2, but well below the 50.0 level which indicates a flat market.

"Much weaker crop prices continue to take the air out of the bubble in agriculture land prices," Creighton economics professor Ernie Goss said.

However, Farmland Partners points to data,mgoing back to 1992, from real estate agents which shows farmland returns, factoring in rental income, never turning negative for a whole year.


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