The ASX passive income stock Rural Funds Group (ASX: RFF) could be one of the most underrated businesses in Australia within the S&P/ASX 300 Index (ASX: XKO).
I’m not expecting it to generate massive capital growth in the next year or two, but the farmland real estate investment trust (REIT) looks like a great buy right now.
There are two reasons why I think it’s a great buy today, so I’m going to outline them below.
Strong income potential
Owning REITs is a great way to own commercial property, receive passive income and potentially see capital growth too.
The business hasn’t given investors a payment cut since it started paying to investors more than a decade ago. Most of those years saw the business increase its distribution by 4% per year. Despite the headwind of higher interest rates, it has been able to maintain its payout at 11.73 cents per unit in the last couple of financial years.
The business is expecting to maintain its annual payout at 11.73 cents per unit in FY26, which translates into a distribution yield of 5.8%.
I like that the ASX passive income stock has a weighted average lease expiry (WALE) of more than a decade, as it means the business has rental income locked in for a long time, giving both security and visibility for investors.
Additionally, I like that the business has a diversified farming portfolio across a number of sectors including cattle, almonds, macadamias, vineyards and cropping. Diversification is both a powerful way to reduce risks and find other opportunities.
Finally, I like that the business has rental growth built into most of its contracts, with those either being fixed annual increases or the growth is linked to inflation, plus market reviews.
Very undervalued?
One of the most useful ways to roughly value a REIT is based on the net asset value (NAV). That tells investors what its business is worth including the property values, the loans, cash and so on.
We can’t truly know what the properties are worth exactly unless Rural Funds actually sells them, so the NAV is just an approximate value that is updated every six months.
The latest update from the business was its FY26 half-year result, which noted that the ASX passive income stock’s adjusted NAV per unit was $3.10.
At the current Rural Funds unit price, it’s trading at a 35% discount to that latest value, at the time of writing, which makes me think this is a great time to buy for the long-term.
The post Is this one of the best ASX passive income stocks to buy right now? appeared first on The Motley Fool Australia.
Should you invest $1,000 in Rural Funds Group right now?
Before you buy Rural Funds Group shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Rural Funds Group wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
* Returns as of 20 Feb 2026
.custom-cta-button p {
margin-bottom: 0 !important;
}
More reading
- 3 top ASX dividend shares for income investors to buy
- Looking for long-term passive income? Try one of these ASX shares
- 20 ASX shares with ex-dividend dates next week
- 2 ASX defensive shares I’d buy in a heartbeat
- 3 ASX dividend shares yielding 5%+ that still have growth potential
Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.