Planting Dividend Seeds With Timber REITs

Dividend investors we are always on the lookout for future dividend growth opportunities as well as current income via a relative high yield. Timber REITs are investment vehicles that can offer a current relative high yield. At the same time, they are defensive in nature against rising inflation as it is a commodity based investment. A timber REIT is simply a Real Estate Investment Trust that owns income-producing properties such as timberland and forests for wood production and paper. Of course, the very nature of timber REITs make them very dependent on the homebuilding sector for much of their profits but they also have the luxury of postponing harvests should demand weaken from the homebuilding sector, and as timber ages and grows the resulting commodity only increases in value which puts timber REITs in a unique position. Let’s take a closer look at some of the more popular timber REITs and one industrial company that is also involved in the lumber and wood production sector.

We’ll start with the largest publicly traded timber REIT, Plum Creek Timber Co. Inc. (NYSE: PCL). PCL owns and manages timberlands in the United States and produces lumber, plywood and other wood products. Based in based in Seattle, Washington, PCL currently yields a healthy 3.90% with a relatively high PE of 36.25 which is still well below industry peers. Let’s take a look at PCL at a glance:

P/E: 36.25
Yield: 3.90%
Profit margin: 14.38% ttm*
EPS 10 year average growth: 2.26%

Next in our assessment of timber REITs is Rayonier Inc. (NYSE: RYN). Like PCL, Rayonier Inc. produces lumber as well as cellulose plant fibers for the use in the manufacturing of cigarette filters, packaging, diapers, pads, wipes as well as LCD screens. Headquartered in Jacksonville, Florida and with global operations in the United States, Australia and New Zealand, RYN currently yields a very high 4.10% with a PE of 16.20.

P/E: 16.20
Yield: 4.10%
Profit margin: 11.34% ttm*
EPS 10 year average growth: 18.69%

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