The US dollar has been losing ground since the onset of the COVID‐19 crisis but Citigroup warns it’s facing a much bigger retreat in 2021.

This doesn’t only have big implications for currency traders but for everyday ASX investors as such a big move will impact on ASX stock performance.

Citigroup thinks the US dollar is likely to drop as much as 20% in the new year if a COVID vaccine becomes widely available, reported Bloomberg.

A retreat of 20% or more from a peak is considered a bear market.

US dollar in bear market face-off

The greenback has already lost around 11% against a basket of other major currencies since it peaked in March. The drop against the Australian dollar is more dramatic at close to 30%!

An effective treatment against COVID will see the US dollar slide further as global economic activity will rebound strongly.

The safe haven status of the US dollar means investors tend to buy it when fearful and sell when greed returns.

Australian battler gaining ground in 2021

Citigroup is encouraging investors to buy the Aussie and the Norwegian krone as these commodity-linked currencies will benefit from an economic recovery.

But vaccines aren’t the only factor pressuring the US currency. The broker believes the US Federal Reserve will stay dovish even as economic conditions normalise.

The rest of the world is also tipped to grow faster than the US and that will prompt investors to rotate out of US assets and into international assets.

History doesn’t repeat but rhymes

This sets us up for a possible repeat of 2001, which marked the start of a multi-year decline in the US dollar with China joining the World Trade Organisation.

This triggered a wave of globalisation that pushed trade volumes higher and leaving the US behind due to its closed economy, according to Citi.

Experts are feeling more confident that an effective treatment against coronavirus can be found. The latest trial result from Moderna Inc (NASDAQ: MRNA) that showed a 94.5% success rate is a big reason for the optimism.

Morderna’s results follows Pfizer Inc.’s (NYSE: PFE) promising trial and there are around 200 drug candidates under development.

ASX stocks that will lose out from a weaker US dollar

If the vaccine heralds the start of a new structural decline in the greenback like Citi believes, ASX stocks with large US dollar exposure will feel the squeeze when earnings are translated back into Australian dollars.

Some of these stocks include the James Hardie Industries plc (ASX: JHX) share price, Reliance Worldwide Corporation Ltd (ASX: RWC) share price, Amcor CDI (ASX: AMC) share price and Afterpay Ltd (ASX: APT) share price.

ASX stocks that benefit from a weaker greenback

On the flipside, importers that pay for goods in US dollars will benefit. These include retailers like the Reject Shop Ltd (ASX: TRS) share price and Nick Scali Limited (ASX: NCK) share price.

Gold stocks like Ramelius Resources Limited (ASX: RMS) share price and Evolution Mining Ltd (ASX: EVN) share price should also benefit.

A weaker US dollar is supportive of gold. As long as bond yields do not rise materially, ASX gold stocks should continue to do well in 2021.

More reading

• Flight Centre and Webjet were among the most traded shares on the ASX last week
• Is buy now, pay later (BNPL) giving Aussies a headache?
• Why Afterpay, Goodman, MedAdvisor, & PointsBet shares are dropping lower
• ASX 200 up 0.35%: Moderna vaccine success, Afterpay update, Westpac upgraded
• Afterpay (ASX:APT) share price lower despite leadership and AGM update

Brendon Lau owns shares of Evolution Mining Limited and James Hardie Industries plc. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Reliance Worldwide Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BOD Australia Ltd (ASX: BDA) share price is on the run today following a positive update from the company regarding an uptick in sales. During the opening minutes of today’s market, shares in the cannabis healthcare company rose as high as 54 cents. However, at the time of writing, the BOD share price has slightly retreated to 51 cents, up 4.1% so far today.

Let’s take a look and see how BOD has performed so far in the first quarter of FY21.

What’s driving the BOD share price?

The BOD share price is marching higher today after the company reported strong medicinal cannabis sales during the month of October.

In total, 755 MediCabilis prescriptions were filled, representing an increase of 106% in monthly prescription volumes since July 2019. The surge in sales was a part of a record purchase order received during the first quarter of FY21 for 2,630 units.

The company noted that since January this year, over 4,400 prescriptions have been filled. This marks a 124% uplift on 2019 calendar year volumes, which received 1,959 orders.

BOD stated that the ongoing upward trajectory in prescription volumes has significantly boosted revenue. In addition, the company said that it’s seeing repeat customers account for 60% of October volumes, reinforcing patient satisfaction.

Dominant market share

Supported by the surge in demand for its MediCabilis product, BOD revealed its market share has amplified. The company reported that it now has 57% market share in full-plant, high CBD products in Australia.

Furthermore, BOD anticipates that robust sales will continue over the coming months due to increased brand recognition. This follows the company’s nationwide clinical observation study that was announced in July this year.

CEO commentary

BOD CEO, Ms Jo Patterson, commented on the sales growth recorded last month, saying:

While MediCabilis is being prescribed for a range of chronic conditions, we are currently achieving strongest uptake amongst patients suffering from chronic pain and anxiety. These conditions require the use of a pharmaceutical grade, standardised and consistent product, which is one of the key advantages of MediCabilis.

Strong demand for our MediCabilis product range in Australia will continue to add to our growing revenue profile and we are confident that sales will continue to increase.

About the BOD share price

The BOD share price has been storming higher since March and is now beginning to approach its all-time high of 64 cents reached in July, 2019.

Recent developments, such as the company entering the Netherlands market and attaining record orders, have presumably been pushing the BOD share price higher.

BOD is hopeful that, as it seeks to expand its offering to new geographical markets, this will lead to further growth opportunities.

More reading

• BOD (ASX:BDA) share price soars 8% on product launch

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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IT services provider Cosol Ltd (ASX: COS) has announced some positive outlook for its business at the company’s annual general meeting (AGM) today. The Cosol share price jumped up 4.41% to 71 cents in afternoon trade today. On a year-to-date basis, the company’s share price has risen by more than 245%, making it one of the top newly listed shares on the ASX.

Key metrics from Cosol’s AGM

More reading

• Here are the 3 best performing IPO shares in 2020

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) filed its Form 13F with the Securities and Exchange Commission on Monday, which gave investors a look at what the Oracle of Omaha and his team of investors bought in the third quarter.

Among the list were four pharmaceutical companies: AbbVie (NYSE: ABBV), Merck (NYSE: MRK), Bristol Myers Squibb (NYSE: BMY), and Pfizer (NYSE: PFE). The first three were similarly sized purchases of around $1.8 billion. The Pfizer purchase was substantially smaller, with a market value around $136 million.

Within the industry, there doesn’t seem to be a theme among the four drugmakers.

Merck and Bristol Myers are heavily into oncology. Bristol Myers expanded its cancer treatments last year with the acquisition of Celgene. Merck is hanging its hat on Keytruda with plans to spin out its women’s health and cardiovascular drugs, as well as some other brands into Organon & Co. next year.

AbbVie is looking to diversify away from its reliance on its megablockbuster Humira, which treats a variety of inflammatory disorders. The pharmaceutical company made a big move into dermatology with the acquisition of Allergan, the maker of Botox, which closed earlier this year.

Pfizer is currently most famous for its coronavirus vaccine, but the pharma giant is quite diversified. Like Merck, Pfizer is looking to get more focused by merging its Upjohn generic-drug business with Mylan in a new company called Viatris that’s scheduled to start trading on Tuesday. Investors will have to wait for the next Form 13F to see what Buffett does with the shares of Viatris that all Pfizer shareholders received.

The pharmaceutical companies do have one thing in common: They’re all trading off their all-time highs and have been for all of 2020, suggesting Buffet might be bargain shopping.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Dow Jones hits new record highs. Are ASX 200 shares next?
• 3 shares that have strongly outperformed their sectors this month
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• What has Warren Buffett been up to lately?
• 2 ASX healthcare shares that have risen since Pfizer’s vaccine news

Brian Orelli, PhD has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Universal Store Holdings Limited (ASX: UNI) share price finally hit the ASX boards on Tuesday after missing out due to the outage on Monday.

And what a start the retailer’s shares have had! At one stage today, the Universal Store share price was up as much as 22% from its IPO price of $3.80 to $4.63.

In afternoon trade its shares are currently changing hands for $4.58.

The Universal Store IPO.

Universal Store has landed on the Australian share market today after completing its initial public offering (IPO) which raised $147.8 million at $3.80 per share. This gave the fashion retailer a market capitalisation of $278.1 million.

The proceeds from the offer are to be used to repay the company’s existing corporate debt facilities, increase cash held, pay transaction costs associated with the offer, and pay selling shareholders.

Trading update.

Ahead of its listing on the ASX boards, Universal Store released a trading update which revealed that it has started FY 2021 strongly.

According to the release, based on unaudited accounts, Universal Store met the proforma first quarter FY 2021 forecast provided in its prospectus. This includes for revenue, earnings before interest, tax, depreciation and amortisation (EBITDA), and net profit after tax.

Furthermore, it revealed that its sales momentum has continued for the last seven weeks (Monday 28 September to Sunday 15 November, inclusive).

During this period, the company achieved group comparable sales growth of 33% versus the prior corresponding period.

Another positive was its update on its Victorian operations. Management advised that on Wednesday 28 October, Universal Store re-opened its 12 previously closed Melbourne stores.

Pleasingly, in the first two full weeks of trading to 15 November, the Victorian stores delivered comparable sales growth of 23% relative to the prior corresponding period.

Universal Store’s CEO, Alice Barbery, said; “We are delighted to have all our Victorian stores open and trading again in the lead up to school holidays and the Christmas season. We are also encouraged by the prospects for our stores and online sales in Melbourne as restrictions are further eased over coming weeks.”

More reading

• What caused the ASX outage on Monday trading?
• $278m fashion retailer debuts on ASX today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Charter Hall Group (ASX: CHC) share price is sinking lower on Tuesday after announcing a new acquisition.

The property company’s shares are down a sizeable 5.5% to $13.63 in afternoon trade.

What did Charter Hall announce?

This afternoon Charter Hall revealed that its wholesale partnership, LWHP, has made an acquisition. The LWHP partnership comprises VFMC, Telstra Corporation Ltd (ASX: TLS) Super, and Charter Hall.

According to the release, the partnership has acquired a $353 million portfolio of six Bunnings Warehouse assets located in prime metropolitan markets.

Bunnings Warehouse is Australia’s leading hardware retailer and owned by Wesfarmers Ltd (ASX: WES).

The portfolio of modern Bunnings Warehouse retail stores was acquired on a yield of 4.63%. Approximately 85% of the portfolio is located in Sydney, Melbourne and Brisbane. It has a weighted average lease expiry (WALE) of 10 years and 2.5% annual rent reviews.

Charter Hall’s Managing Director and CEO, David Harrison, commented: “We are proud to further expand our strong relationship with Wesfarmers and Bunnings Group. Across the Charter Hall platform we now have in excess of $2.4 billion invested in 59 Bunnings stores, 50 of which are located in metropolitan locations.”

“This transaction represents our seventh Bunnings portfolio acquired since 2006 when we first recognised the strength of the Bunnings business, the relatively low rents per square metre of lettable area and the large prime sites Bunnings typically occupy,” he added.

This sentiment was echoed by LWHP Fund Manager, Ben Ellis. He said: “This off-market acquisition extends the Bunnings relationship, expands our off-market transaction track record and enhances the diversity and breadth of the LWHP partnership which has been one of our most successful partnerships delivering an IRR since inception exceeding 15%.”

Despite today’s decline, the Charter Hall share price is up 27% over the last 12 months.

More reading

• Latest ASX small cap buy calls from top brokers
• These beaten-up shares are about to pick up: Moody’s
• AMP (ASX:AMP) asset sales part of wealth sector transformation

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Unibail-Rodamco-Westfield (ASX: URW) share price is on a tear again today, up 17% in late afternoon trading. That brings Unibail’s share price gains to a whopping 63% since the closing bell rang last Monday 9 November. Despite the past week’s stellar performance, the Unibail share price is still down 58% year to date.

The brick and mortar retailer was already struggling with high debt levels and some questionable asset acquisitions heading into 2020. And then its share price was savaged by COVID-19 lockdowns and social distancing in Europe, the United States and Australia, which saw many of its shopping centres temporarily shuttered.

What does Unibail Rodamco Westfield do?

Unibail is one of Europe’s largest commercial real estate companies, owning a portfolio of quality retail and office complexes. It has assets in Europe, the United Kingdom and the US.

Unibail acquired Australian shopping centre operator Westfield Corporation, created by the split of Westfield Group, in 2018. This saw the Unibail share price first list on the ASX. The company makes up part of the S&P/ASX 200 Index (ASX: XJO).

Why is the Unibail share price up 17% again today?

The Unibail share price began its upward surge last Tuesday 10 November. This came after the company announced shareholders had rejected the supervisory board’s 3.5 billion euro (AU$5.7 billion) capital raising via the issue of ordinary shares.

The capital raising was part of the company’s wider ‘Reset’ plan and was intended to repay some of its outstanding debt.

However, the resolution was stringently opposed by a group of activist investors, led by Leon Bressler and Xavier Niel, who succeeded in derailing the capital raise part of the Reset plan.

In an ASX release yesterday, Unibail announced a major shakeup to its supervisory board that unfolded on Friday.

Colin Dyer resigned as chair of the board, while remaining on as a member of the board.

Leon Bressler was appointed as chair with immediate effect, while Xavier Niel took up the position on the board as member of the remuneration committee.

Investors clearly appear pleased with the new management, alongside its decision to axe the controversial capital raising in favour of more aggressively disposing of non-performing assets.

Today’s 17% leap in the Unibail share price would likely have occurred yesterday, had the ASX not shut down over a software update glitch.

More reading

• ASX 200 up 0.35%: Moderna vaccine success, Afterpay update, Westpac upgraded
• ASX 200 up 1.2%: Afterpay ASIC response, Elders result, CSL vaccine facility
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• These were the best performing ASX 200 shares last week
• Vaccine hopes cause ASX 200 to rise on Tuesday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Austal Limited (ASX: ASB) share price is edging higher today. This comes after the global shipbuilder delivered a high-speed catamaran ferry to Chinese mainland ferry operator, Blue Sea Jet.

At the time of writing, the Austal share price is up 2.51% to $2.86. In comparison, the S&P/ASX 200 Index (ASX: XJO) is 0.2% higher to 6,498 points.

Austal designs and manufactures high performance vessels for commercial and defence customers worldwide. Most notably, Austal builds and services warships for the Australian Royal Navy and the United States Navy.

Catamaran delivery

Austal advised the market today that it has fulfilled a contract delivery of a 42m high-speed catamaran passenger ferry. Repeat customer, Blue Sea Jet is expected to put its ship in service immediately.

The catamaran will ferry up to 272 people over the waters of the Dawan District between Guangdong, Hong Kong, and Macau.

The vessel, named Xin Hai Chi, was constructed at the Aulong’s shipyard in Zhongshan City. It is the third ship to be designed and built for Blue Sea Jet since 2016.

Joint venture program

Austal highlighted that Aulong Shipbuilding is a joint venture program with Jianglong Shipbuilding of Zhuhai, China. Established in June 2016, the partnership aims to pursue commercial passenger and non-military vessel opportunities in mainland China.

With an ownership stake of 40%, Austal has licenced a number of commercial aluminium vessel designs for marketing through China. Jianglong Shipbuilding provides local shipbuilding infrastructure, and manpower of up to 1,000 employees across two shipyards.

Austal CEO David Singleton said the new delivery confirmed Aulong’s position as a preferred shipbuilder of China’s leading ferry operators. He added:

Aulong has quickly developed a strong reputation for delivering China’s best high-speed craft – drawing on Austal’s expertise in commercial ferry design and Jianglong’s local shipbuilding capability.

About the Austal share price 

The Austal share price has been on the mends to recovery since the start of November. Its shares fell to an 8-month low of $2.59 in late October. This was just 15% higher than its multi-year low reached in March this year due to COVID-19.

The company has a market capitalisation of $1.02 billion and a price-to-earnings (P/E) ratio of 11.5.

More reading

• Dow Jones hits new record highs. Are ASX 200 shares next?
• ASX 200 up 0.35%: Moderna vaccine success, Afterpay update, Westpac upgraded
• Here’s how the ASX 200 compares to other global indices
• Macquarie (ASX:MQG) picks best ASX stocks to buy for 2021 post-COVID recovery
• ASX 200 on watch after study shows Moderna’s COVID-19 vaccine is 94.5% effective

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This morning Australia’s leading investment platform provider CommSec released data on the most traded ASX shares on its platform from last week.

Once again, there were a number of familiar faces filling up the top five over the period.

Here’s the data:

Flight Centre Travel Group Ltd (ASX: FLT)

Investors were buying and selling this travel agent’s shares in large numbers last week after Pfizer announced very positive results from its phase three COVID-19 vaccine trials. This made Flight Centre the most traded share on the CommSec platform and attributable for 2.6% of total trades. Surprisingly, just 54% of trades came from the buy side. Buyers will have been happy to see the Flight Centre share price record a 12% weekly gain last week.

Zip Co Ltd (ASX: Z1P)

This buy now pay later provider was popular with investors again last week. It accounted for 2.2% of trades on the CommSec platform. And although 63% of trades came from buyers, it couldn’t stop the Zip Co share price dropping 0.7% over the five days. Investors were selling COVID-winners last week and rotating into beaten down shares.

Afterpay Ltd (ASX: APT)

Fellow buy now pay later provider Afterpay was also popular with investors and accounted for 2.2% of trades on the platform. As with Zip, most of these trades came from buyers. Approximately 61% of trades came from the buy side and helped drive the Afterpay share price 1.3% higher for the week. This was a decent result given the selloff of COVID-winners following the COVID-19 vaccine news.

Webjet Limited (ASX: WEB)

This online travel agent was another travel share that was heavily traded last week due to the vaccine news. It contributed 1.9% of the total trades on the CommSec platform. And although the Webjet share price was on fire and surged 18% higher, the buying and selling was evenly split. Approximately 47% of trades came from buyers and 53% from sellers.

Qantas Airways Limited (ASX: QAN)

This airline operator was the third travel share to make the top five last week. It accounted for 1.7% of trades on CommSec over the period. As with Webjet, the Qantas share price surged materially higher following the COVID-19 vaccine news. However, just 51% of these trades came from the buy side.

More reading

• Is buy now, pay later (BNPL) giving Aussies a headache?
• Why Afterpay, Goodman, MedAdvisor, & PointsBet shares are dropping lower
• ASX 200 up 0.35%: Moderna vaccine success, Afterpay update, Westpac upgraded
• Afterpay (ASX:APT) share price lower despite leadership and AGM update
• Macquarie (ASX:MQG) picks best ASX stocks to buy for 2021 post-COVID recovery

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In this article are three ASX dividend shares that have large dividend yields and consistent payouts.

The Reserve Bank of Australia (RBA) recently cut the official interest rate to just 0.10%.

There are some businesses on the ASX that have yields much higher than that:

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi has a grossed-up dividend yield of 5.9% at the current JB Hi-Fi share price. It has grown its dividend each year since FY13.

In FY20 the company grew its final dividend by 76.5% to 90 cents per share, bringing the full year dividend to 189 cents per share – an increase of 33.1%.

The dividend growth was supported by the increase in sales and net profit. Total sales increased by 11.6% to $7.9 billion whilst underlying earnings per share (EPS) went up by 33.2%.

The ASX dividend share delivered much higher online sales due to the effects of COVID-19. JB Hi-Fi saw nearly $600 million of online sales, which was up 50% year on year. The fourth quarter saw online sales rise by 134%.

That revenue growth has continued in the first quarter of FY21 where JB Hi-Fi Australia sales rose by 27.3% and The Good Guys revenue grew by 30.9%.  Melbourne metro stores are now re-open.

Service Stream Limited (ASX: SSM)

Service Stream is a business involved in the design, construction, operations and maintenance of assets across Australian networks.

One of its biggest clients is the NBN. It recently extended its operations and maintenance master agreement with the NBN. This contract generated $330 million of revenue in FY20 and $280 million in FY19.

Service Stream maintained its dividend in FY20, and had been steadily growing its dividend for years before that. At the Service Stream share price it currently offers a grossed-up dividend yield of 5.9%.

The ASX dividend share’s management is working on diversifying its revenue away from telecommunications, expanding its client base, growing its exposure to a broad range of regulated essential infrastructure markets and building a base of long-term, capital light contractual agreements.

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a variety of farm types including cattle, vineyards, cropping (sugar and cotton), macadamias and almonds. Rural Funds used to own poultry assets, but it recently sold those. 

It has a goal of steadily growing the distribution by 4% each year. This is supported by two pillars.

There is contracted rental growth built into all of Rural Funds’ tenancy agreements. That indexation is either a fixed 2.5%, or it’s linked to CPI inflation, with some having market reviews.

Rural Funds has also been working on investing in productivity improvements at its farms. The idea is that it will increase the value of the farm as well as unlock more rental income over time.

The ASX dividend share’s properties are spread across different states and climactic conditions. It doesn’t carry the operational risks like the agricultural tenant does, but it does own water entitlements which can be leased to the farmers for them to be used, if needed.

In FY21 the farmland REIT has provided distribution guidance growth of 4% to 11.28 cents per unit. At the current Rural Funds share price it has a forward distribution yield of 4.4%.

At the end of FY20 it had an adjusted net asset value (NAV) per unit of $1.94. The asset value is adjusted to include the market value of the water entitlements, rather than the (lower) cost price of the water entitlements. That means it’s currently valued at a 31.9% premium.

More reading

• These ASX dividend shares offer income investors attractive yields
• 2 ASX dividend shares with yields over 5% today
• 3 shares that have reacted adversely to vaccine news
• Best and worst ASX retail stocks to own in the COVID recovery
• 2 ASX dividend shares growing their dividend every year

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Service Stream Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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