NZ Zealand Rural Land Company has suspended paying an interim dividend in favour of buying back shares that are currently priced by the market at around half of their net asset value.
The directors claim that putting money into buying back shares is more attractive for shareholders than paying dividends.
The company will use available cash flow for an on-market buyback and to repay a convertible note recently issued to buy forestry assets.
NZL shares are trading at 88c, having fallen from around $1.05 over two months from March to May.
Shares in NZL had a net asset value (NAV) of $1.65 on December 31, the most recent balance date.
Co-founder and director of Rural Land Management Richard Milsom said NZL shares are somewhat illiquid, and the price is suffering along with all other listed property stocks at present.
Only small parcels of shares are selling on the market and bigger shareholders are sitting tight, he said.
“While the price is way down, the directors have decided to buy back shares in the interests of all shareholders,” Milsom said.
Showing his faith in the company, NZL chair Rob Campbell, the prominent director, economist and former trade unionist, has purchased a number of smaller on-market share parcels in recent times and now has 942,000.
Campbell told the annual meeting on June 23 that the patience of investors will be rewarded as NZXL continues to increase its scale and earnings.
“History shows it is also reasonable to expect [that] as this occurs the discount to NAV closes.”
The guidance by directors of adjusted funds from operations (AFFO) for the current financial year ending December 31 is 5.25c to 5.75c a share.
The interim dividend to June 30, which has been withheld, would have been about 2c and with 140 million shares issued the cash now available for the share buyback would be around $2.8 million.
Campbell said the outlook for NZL remains extremely positive as its farm and forest leases incorporate regular and uncapped rent reviews that benefit from higher inflation.
About two-thirds of the leased portfolio will have CPI rental reviews from April 15, 2024 and the CPI increase over the three years NZL has been operating totals 18%.
NZL currently owns just under 15,000ha of farm and forestry land and has full occupancy with eight high-quality tenants.