BlackRock Inc. (NYSE:BLK) recently announced it had taken a multimillion-dollar position in farmland in several Midwestern states. Sure, it’s just one of many investments for the investment management company. But BLK stock has a 3.6% dividend and a 10-year return of almost 300%. Not bad … though admittedly the -20% performance so far in 2011 is reason for concern.
Buy the Agribusiness ETF
The closest thing to a pure farmland play among exchange-traded funds is the Market Vectors Agribusiness ETF (NYSE:MOO). The MOO fund focuses on agriculture and food companies that feed the farm industry — like seed giant Monsanto (NYSE:MON) and the maker of those iconic green tractors, Deere & Co. (NYSE:DE). Of course, shares of this agribusiness ETF are off 11% so far in 2011 and have lagged the market for about 18 months, so momentum isn’t on your side.
Buy Individual Ag Stocks
If you don’t like the diversified flavor of the farm ETF, then cherry-pick some of the individual farm players. Take, for instance, the previously listed Monsanto. This stock is up 5% so far in 2011 thanks to strong demand for its seeds that are resistant to its Roundup weed killer — meaning farmers can plant crops and spray the weed killer at will without worrying about hurting their veggies. MON has been strong lately; however, it still is way off since its 2008 peaks and is in the red since 2009. But it’s worth noting fiscal 2011 earnings came in at $2.96 per share — up almost 50% from EPS of $2.01 the prior year.
A fourth alternative is coming to market (theoretically) soon, too. Virginia-based Gladstone Land Corp has filed for an IPO. And it could sell as much as $250 million in common stock after its initial public offering. It would be a real estate investment trust, or REIT, that owns two farms in California and leases properties to strawberry growers including Dole Foods (NYSE:DOLE). Dole has used the firm’s farmland since 2004, so the lease is ironclad — and the appreciation of farmland seems likely to continue. The only question is how fast the Gladstone REIT will come to market and allow investors to share in its success.
Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the aforementioned stocks. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.