Money Does Grow on Trees With These Stocks (PCL, PCH, RYN)
As pointed out by CNBC.com's Mark McLaughlin, "From 1987 through 2007, timber delivered an average annual return of 15.8 percent — based on the performance of the NCREIF Timberland Index — compared to 11.5 percent for the S&P 500 while exposing investors to less risk."
Because of the relative closed nature of the business, for a number of years it was fairly difficult to invest in timber companies that profited off of the trend. Now, a variation of the Real Estate Investment Trust (REIT) is available for investment in the timber business.
CNBC's McLaughlin notes that "Timber REITs, which own and manage forest tracts and wood processing plants, trade publicly like stocks but must pay out 90 percent of their earnings to investors through dividends."
Below are three stocks worth checking out.
Plum Creek Timber Co. Inc. (NYSE: PCL) is a private timberland owner in the United States. As of December 31, 2009, Plum Creek owned 7 million acres of timberlands located in 19 states. The company's holdings are diversified in geography, species mix, and age distribution. Plum Creek Timber has consistently delivered solid annual net income, and the balance sheet is well-positioned moving forward. Shares are trading slightly higher this afternoon, to $38.80.
Potlatch Corporation (NYSE: PCH) is a real estate investment trust (REIT), with approximately 1.6 million acres of timberlands in Arkansas, Idaho, Minnesota and Wisconsin. Through a wholly owned subsidiary, the company operates a real estate sale and development business and six wood products manufacturing facilities that produce lumber, plywood and particleboard. Operating income has increased substantially over the past few quarters, and the stock could make a bull run toward $40 if $36 resistance can be broken. Currently, shares sit at $35.95.
Rayonier Inc. (NYSE: RYN) is an international forest products company primarily engaged in activities associated with timberland management, the sale and entitlement of real estate, and the production and sale of specialty cellulose fibers and fluff pulp. Debt levels have remained fairly constant recently, and cash on hand has increased by more than 4 times in a year. Shares of Rayonier are higher by 1.4% this afternoon, to $54.30.
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