Forget Bitcoin: I’m Buying This REIT Under The Radar

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Like many people, I thought about buying Bitcoin (CRYPTO: BTC). The main reason is to hedge against inflation, which has been very high this year. However, I did not buy one because it is very volatile. The cryptocurrency has seen several significant drops from its all-time high, including more than 50% earlier this year.

Because of this, I started looking outside of cryptocurrency for an inflation hedge. While I have also considered investing in gold, I have focused on an under-the-radar real estate investment trust (REIT) that offers many of the same benefits of buying Bitcoin, as well as others. without the volatility that hurts your stomach.

This REIT is Gladstone Land Focused on Agricultural Land (NASDAQ: LAND). Here is why I plan to buy it instead of Bitcoin as an inflation hedge.

Image source: Getty Images.

Why farmland?

Before digging into Gladstone Land, I wanted to advocate for farmland as an investment. Since 1991, farmland has generated higher cumulative returns than all other major asset classes except REITs. Additionally, farmland produced these higher returns with less volatility than all but two major asset classes (CDs and AAA-rated bonds). In fact, since 1991, farmland has not seen a single year of decline, while gold, the stock market, and Bitcoin have all seen declines of over 50% from their all-time highs.

Two factors determine the ability of agricultural land to generate attractive returns: the annual cash rent and the appreciation in land value. Farmland generates income for its investors, which sets it apart from other inflationary hedges like gold and Bitcoin, which do not produce income. Meanwhile, agricultural land benefits from inflation because the value of land tends to increase at least by the rate of inflation. These factors make farmland an excellent hedge against inflation.

Dig in Gladstone Land

Gladstone Land currently has 164 farms representing approximately 113,000 acres in 15 states. His farms mainly grow fresh produce, like fruits and vegetables, or permanent crops, like berries and nuts. These types of farms tend to be better investments than those that grow staple crops (e.g. corn, wheat, and soybeans) because they experience less price volatility and government dependency, as well as lower storage costs.

Gladstone primarily rents its farms to farmers on long-term triple net leases, making the tenant responsible for insurance, maintenance and property taxes. These leases typically include a fixed cash payment with annual indexations, upward market adjustments, or participating characteristics, such as a percentage of gross farm income.

These rental conditions give Gladstone Land a good inflation margin. It usually relates annual rent increases to the rate of inflation. Meanwhile, the participating features allow prices to rise, with fresh produce historically exceeding the historic inflation rate 1.5 times since 1980. In addition to its inflation-protected rental income, Gladstone Farms benefit from rising land values, providing another layer of inflation protection.

However, Gladstone Land is more than a hedge against inflation. The Farmland REIT has a long history of growing shareholder value by expanding its agricultural portfolio through acquisitions. For example, it bought five new farms in three states and additional water access for $ 62.3 million in the third quarter. Since its initial public offering (IPO) in 2013, Gladstone has grown its agricultural portfolio from less than $ 200 million to nearly $ 1.4 billion today.

Combined with the increase in rental income, its constant acquisitions regime has enabled Gladstone to increase its cash flow per share and dividend at attractive rates. Gladstone has increased its monthly dividend 24 times over the past 27 quarters, increasing it overall by 50.7%. It aims to continue increasing this payment in the future at a rate above inflation. Overall, Gladstone Land has generated annual compound total returns of 14.6% for its shareholders since its IPO.

All the advantages of Bitcoin (and more) – without the volatility

One of the premises of investing in Bitcoin is that it can be a hedge against inflation. While the cryptocurrency’s returns have certainly exceeded inflation over the years, they have been extremely volatile.

This is why I decided to forget about using Bitcoin to protect myself against inflation. Instead, I plan to invest in farmland through the little-known Gladstone Land REIT. It has a long history of exceeding inflation returns with much less volatility than Bitcoin, which looks likely to continue in the future.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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