ADC offers attractive long-term value due to superior growth rates, safe dividends, and a depressed valuation relative to historical averages.

AgriRealty Corporation (ADC) is known as the younger sibling of Realty Inc., essentially a smaller version of it. However, there is one fundamental difference. This real estate investment trust is growing at a faster rate, allowing it to increase dividend payouts at a faster pace.

That said, like most real estate investment trusts, we note that it experienced a significant decline last month. The stock has fallen by about 8.4%, and in fact, over the past year, it has fallen by 4.58%, giving it an initial return of about 4.75%.

Therefore, this initial return is approaching the 5% threshold.

Therefore, ADC was certainly not immune to this type of decline. Is ADC stock attractive at current prices? Can it continue to increase adjusted cash flow from operations and dividends at a healthy rate?

But quickly, I would also like to mention that I will be interviewing the CEO of AgriRealty Corporation in a few days.

Now, when we think about ADC, it’s important to start by understanding what kind of Real Estate Investment Trusts (REITs) we’re actually looking at. The best way to look into this matter is really by examining the underlying assets.

Therefore, I have always said that a real estate investment trust is ultimately only as good as its tenants. So, who are Agree Realty's tenants? Well, we need to understand that this is a commercial real estate investment trust that owns approximately 2,900 different properties across the country.

What is truly impressive is that you can see that 65.8% of their tenants are considered to be investment-grade. Now, as a kind of simple reference point, this figure is actually higher than Realty Income Corporation.

Therefore, the overall quality of their portfolio is considered very strong compared to their peers.

Moreover, this is a real estate investment trust that is growing at a very healthy rate. This is usually one of the advantages of these smaller real estate investment trusts. They can increase the adjusted funds from operations per share, which you should keep in mind is the primary metric for real estate investment trusts.

It is the ultimate measure of intrinsic value, but they can usually grow this at a much faster rate with fewer headwinds.

For example, if Realty Income is growing in the range of 3 to 3.5%, Agree Realty Corporation has historically, at least recently, been perhaps one percentage point higher than that.

They have been in that range of 4 to 5%, and growth is expected to continue at a relatively strong rate over the next few years.

Now, it is certainly worth mentioning that the dividend payouts are very well covered. Remember that it is paid from the adjusted funds from the transactions. Therefore, we can see that adjusted funds from operations (AFFO) per share have easily covered dividends over the past few years.

Once again, dividend payouts will continue to grow at a rate of three or four or perhaps slightly higher, as long as adjusted cash flow from operations continues to grow at that rate as well.

But what we can see is that despite very stable cash flows and growth, AgriRealty has seen a significant decline in its valuation multiple, particularly in the last year alone.

We can see that it is trading at an adjusted price-to-money multiple of around 14.4, but if we look at the average over the past five years, it is closer to approximately 16.83.

If we look at the latest earnings report, we can see that they actually raised their guidance for adjusted earnings per share for 2026 just a few months ago.

So, for example, if someone is an investor in dividends and is looking for income now, and is looking at this AgriRealty yield of about 4.75%, they have to ask themselves, why would they take the risk to get a 4.75% yield when they can get a risk-free yield of 5.25%?

This is a question that many people are forced to ask.

The obvious answer here is that if you are a long-term investor, AgriRealty will continue to increase its distributions as its intrinsic value grows. As a result, your advantage is not limited to dividend growth, but you will also see an increase in the share price.

However, AgriRealty took an interesting step just a few days ago. They announced the pricing of $400 million in unsecured bonds at 5.65% interest, maturing in 2036.

And you can see that this was certainly the case for AgriRealty. They have issued a lot of shares, and that is not necessarily a bad thing as long as they can achieve a positive return on investment from the capital they have raised.

However, that is exactly what "AgriRealty" chose to do. If we look closely at the comment that was made. This offering boosts our liquidity position to over $2 billion. This deal and the absence of large debt maturities until 2028 put our company in a good position to execute our growth strategy until 2027.

Well, simply put, they have $2 billion available to support acquisitions and development, which is the main driver of most of the growth this fund is currently experiencing. They also mentioned that they do not have any large debts due in the next few years.

We can see evidence of this when we look at their investor presentation from the second quarter of 2026. Compared to 2028 and beyond, where there is a well-graded debt maturity schedule, we see that the remainder of 2026 and 2027 have very little debt due.

Therefore, they are not raising capital because they need to pay off any large debts. In fact, the balance sheet is already very well prepared for the current macroeconomic situation.

They essentially hedged against interest rate increases in advance, and this is really paying off right now.

Now, the company has a much greater ability to go out and continue pursuing acquisitions to buy properties at lower effective borrowing costs than it would have without hedging.

Pay close attention to the Q2 2026 column here. Their average weighted capitalization rate is 7%. This illustrates what ADC actually buys with this capital. So, yes, they are indeed generating a positive return on investment.

And so, we suddenly began to understand a little more why they were able to raise the directives.

So, I think in general, when we look internally at the stock, we find that they are raising the guidance. Things are actually going very well. There is still a significant growth trajectory ahead.

Management seems to believe this, as do analysts when looking at their estimates of adjusted net operating income (AFFO) per share over the next few years.

I mean, the ADC is at its lowest level in 52 weeks as 10-year Treasury yields continue to rise. So, what does ADC's actual valuation look like now? Well, once again, analysts seem very optimistic about this real estate investment fund for at least the next year.

They are pointing to an increase of about 23% from current prices, giving it a fair value of $82.81.

Assuming a future dividend growth of 4%, the fair value is approximately $71, which implies an upside of approximately 6%. If we raise this percentage to about 4.5%, we will get very close to the average target price set by analysts at $82.81.

We then reach about $80.50, which means there is an increase of approximately 20%. Again, this assumes dividend growth of approximately 4.5%.

So, can ADC achieve this level of dividend growth? I think that's possible. It's a question I'll definitely be sure to ask the CEO of the "Mispiced" podcast.