1 ASX dividend stock down 39% I'd buy right now
The ASX dividend stock Rural Funds Group (ASX: RFF) could be one of the leading stocks to buy right now for passive income.
I like to buy businesses for less than they're worth and to receive solid dividends from my investments, with the prospect of longer-term growth.
For me, Rural Funds ticks all of those boxes after the farmland real estate investment trust (REIT) reported a compelling set of numbers in the FY26 result.
Let's get into why it seems so appealing.
Very undervalued
A REIT makes it quite easy to judge its value by regularly telling investors about its net asset value (NAV) or net tangible assets (NTA).
The NAV and NTA metrics tell investors what the net value is when you include the property valuations, the loans, cash and other assets and liabilities. If the business were to be shut down, the NAV should be what remains for distribution to shareholders.
REITs regularly independently value their assets to ensure that the NAV figure is realistic.
Rural Funds reports an adjusted NAV to the market, with the adjustment being to include the market value of the water entitlements. Rural Funds owns significant water entitlements, which can be used by farming tenants for their operations.
Other key assets in the Rural Funds portfolio include almond farms, cattle farms, macadamia farms, vineyards and cropping farms.
It recently reported that at 30 June 2026, it had an adjusted NAV of $3.22 – this was an increase of 4.5% year-over-year. At the time of writing, the Rural Funds unit price is trading at an approximate 40% discount to that adjusted NAV, which I'd describe as a significant discount.
The ASX dividend stock offers a good yield
The large discount means that Rural Funds offers a much larger distribution yield than it would if it were trading at the same value as its adjusted NAV.
Rural Funds has provided investors with an annual distribution per unit of 11.73 cents in the last few financial years. I think maintaining the payout has been impressive during these periods of higher interest rates.
It has provided guidance that it will pay an annual distribution of 11.73 cents per unit in FY27. That translates into a forward distribution yield of 6%.
Rental income is growing
I think one of the most important factors in deciding whether a REIT is attractive is its potential for rental income growth. That's the best way to increase property value and fund higher future distributions.
The ASX dividend stock has a weighted average lease expiry (WALE) of more than 14 years, meaning that rental income is locked in for a long time.
A significant portion of the REIT's rental income is growing with fixed annual increases, while another large chunk of the revenue is growing because it's linked to inflation.
I believe the ASX dividend stock is very undervalued, particularly for when interest rates start coming down again, whenever that is.
The post 1 ASX dividend stock down 39% I'd buy right now appeared first on The Motley Fool Australia.
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.
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