I'm a big fan of ASX dividend stocks that can provide steady passive income and long-term capital growth. After a large decline over the last couple of years, I view the Rural Funds Group (ASX: RFF) share price as a very attractive opportunity.

Rural Funds is an agricultural real estate investment trust (REIT) that owns various farms, including almonds, vineyards, macadamia, cattle, and cropping.

As the chart above shows, the Rural Funds share price has dropped around 40% since January 2022.

When an ASX dividend stock is sold off that much, I get excited because of its higher dividend yield. A large sell-off significantly boosts the yield. For instance, if a business has a 5% dividend yield and the share price drops 10%, the yield becomes 5.5%. If it drops 20%, then the yield would become 6%.

With Rural Funds now offering a distribution yield of 6.3%, I'd say now is a good time to look at the ASX dividend share to determine whether it's a compelling business.

Strong tenant base

Having high-quality tenants is appealing because they are more likely to keep paying rent and be able to afford higher rental payments in the future.

The following are some of the REIT's largest tenants by rental income: Olam, The Rohatyn Group, JBS, Select Harvests Limited (ASX: SHV), Stone Axe, Camm Agricultural Group, Australian Agricultural Company Ltd (ASX: AAC) and Treasury Wine Estates Ltd (ASX: TWE).

I believe a REIT's rental income is only as strong as its tenant base, so Rural Funds ticks the box here.

Growing rental income

The ASX dividend stock is benefiting from a range of rental income growth mechanisms. More than half of its portfolio has rental income linked to CPI inflation, so this revenue has been growing at a pleasing pace over the last few years.

A significant amount of the rest of its rental income contracts have a fixed annual increase (plus market reviews), so this revenue is steadily climbing over the long term.

Rural Funds' weighted average lease expiry (WALE) is more than 13 years, meaning the business has a lot of rental visibility and growth built into its portfolio.  

Big ASX dividend stock asset discount?

Rural Funds regularly has its assets independently valued. It's up to investors to decide how much weight they give to those valuations, but the properties are producing good rental income each year.

According to Rural Funds, the ASX dividend stock had an underlying net asset value (NAV) of $3.14 on 30 June 2024. That means the Rural Funds share price is currently valued at a 40% discount to that adjusted NAV figure. To me, that's very appealing for passive income investors.