The Federal Agricultural Mortgage Corporation ($AGM) is one of those weird businesses that most people have never heard about.
Yet, the company has delivered long-term, market-beating returns.
And, has raised its dividend at a rate that outpaces inflation.
In today’s article, we’ll look at what the Federal Agricultural Mortgage Corporation, often referred to as “Farmer Mac,” does. And why it might be an interesting income investment.
What Does The Federal Agricultural Mortgage Corporation Do?
“Farmer Mac is a stockholder-owned, federally chartered corporation that combines private capital and public sponsorship to serve a public purpose.” This is how the company describes itself in its 2023 annual report.
Essentially, the Federal Agricultural Mortgage Corporation issues loans and purchases farm mortgages from regional banks.
Reviewing a financial company may seem weird at a time when bank failures are a major news story. But, I think Farmer Mac has several unique advantages that separate it from the competition.
Mainly, the fact that farming is subsidized by the United States government.
The U.S. government compensates farmers for low crop yields, droughts, and natural disasters. This means that, even in bad years, farmers still have the money to pay their mortgages.
Something that’s reflected in Farmer Mac’s miniscule cumulative lifetime loses of just 0.11%.
As well as the firm’s long-term, market-beating performance.
Federal Agricultural Mortgage Corporation Fundamental Analysis
Farmer Mac has compounded at almost 18.57% per year, for the past 10 years.
The stock has also delivered inflation-beating dividend growth, with a 5-year compound annual growth rate of 18.93%. And, probably due to the company’s obscure nature, Farmer Mac trades at a relatively low PE ratio.