If you are looking for a regular source of income from the Australian share market, then Rural Funds Group (ASX: RFF) shares could be worth considering right now.
This ASX dividend stock comes highly recommended by analysts at Bell Potter, who believe that its shares are undervalued by the market right now.
But what is Rural Funds? It is a listed agricultural REIT with a portfolio focused on almond orchards, vineyards, cattle, cotton and macadamias.
Bell Potter notes that assets in its portfolio are some of the most productive in the industry and leased to high quality tenants. This includes Treasury Wine Estates Ltd (ASX: TWE), Olam, JBS, AACo and Select Harvests Ltd (ASX: SHV).
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Why is it an ASX dividend stocks to buy?
According to a recent note, the broker's analysts "continue to see the discount to market NAV of RFF's share price as excessive, especially considering the ongoing growth in rural land values through 1HCY24."
In light of this, the broker recently reaffirmed its buy rating and $2.50 price target on the ASX dividend stock. Based on its current share price of $1.86, this implies potential upside of 34% for investors over the next 12 months.
This means that a $10,000 would be worth approximately $13,400 by this time next year if Bell Potter is on the money with its recommendation.
In addition, some attractive quarterly dividends are expected from Rural Funds in the near term.
Bell Potter is forecasting an 11.7 cents per share dividend in FY 2025 and then a 12.2 cents per share in FY 2026 (paid out in quarterly instalments). This equates to dividend yields of 6.3% and 6.55%, respectively.
This would generate dividend income of $630 and $655, respectively, from that $10,000 investment, bringing the total potential 12-month return beyond 40%.
Commenting on its bullish view, the broker said:
Our Buy rating and $2.50pu target price is unchanged. RFF trading at a -40% discount to market NAV and -32% discount to published FY24 NAV, representing some of the widest discounts in RFF's listed history and compared to a historical 8% premium to market NAV and 21% premium to NAV. The discount to NAV appears excessive when we consider the material improvement in counterparty profitability indicators in recent months (cattle, almond and macadamia prices) and that Australian farm assets have in general largely held values through CY24 (and up in most core RFF regions).
