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Farmland Partners raises dividend - and firepower for land buys

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Farmland Partners raised its dividend for a third time as it unveiled a windfall already from its latest farmland purchase, which took its portfolio to 68,550 acres.

The Colorado-based group - which buys land for renting to farmers, to exploit rental yield and capital growth – said that it was raising its quarterly dividend to $0.1275 per share, up 10% from a previous rate of $0.116 per share.

At an annualised rate, the increase - the third since Farmland Partners floated in April last year - represents $0.51 per share, equivalent to a yield of 4.6% on the stock at its closing price on Tuesday of $10.97.

And it came "in connection with the closing" of the group's latest land purchase, of eight row crop farms in North Carolina, South Carolina and Virginia totalling 15,042 acres.

'Largest acquisition to date'

The $49.8m acquisition offered an immediate cash return for Farmland Partners in that it agreed to leaseback the land for five years to the seller, who paid upfront rent for the rest of 2015, and 10% on rents for the years 20016-19.

"The collection of a portion of the rents in advance helps secure the rents for the five-year term of the lease," said Luca Fabbri, the Farmland Partners chief financial officer.

While Farmland Partners failed to give the total rental payment it received, the annual rental rate of $4.3m implies a sum of about $4m, assuming a pro-rata bill for the rest of 2015.

Paul Pittman, the group's chief executive, said that the company's "largest acquisition to date allows us to enter two new states, North Carolina and Virginia, increasing our portfolio to 68,550 acres in 10 states, and enabling us to raise our dividend".

And Mr Pittman heralded more land acquisitions ahead, saying that an increase of $15m to $165m in a secured note facility at Federal Agricultural Mortgage Corporation - or Farmer Mac, the government-sponsored lender that creates a secondary market in ag loans – "gives us flexibility as we continue working through out robust acquisition pipeline".

Land price forecasts

The determination to press ahead with acquisitions comes even as the US farmland market has faltered, reducing the short-term scope for Farmland Partners, and other land investors, to achieve capital gains on their portfolio.

However, Farmland Partners, while expecting US farmland values "to be flat to slightly up or down in the near term" forecasts better times ahead, as world population growth and increased meat in developing world diets lifts demand for grains.

"We believe over time significant increases in land values will come due to food demand and land scarcity," it said in a recent filing.

"Appreciation rate should be higher in the coming decades relative to the historic rate of 5-6% per annum due to land and water scarcity.


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