Timber REITs: Dividend Yields and the Dallas Mavericks

29 07 2012

Rayonier’s (RYN) announced ten percent dividend increase reminded me of the well-traveled quote from investor and Dallas Mavericks owner Mark Cuban on stocks and dividends:

I believe non dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.

The quote speaks to the importance of considering ‘total return’, which accounts for both (cash) income and (capital) appreciation, when valuing investments.  For timberland-owning REITs, this includes (1) quarterly dividends and (2) changes in stock prices for a given time frame.  For direct timberland investments, this includes (1) income generated from, in part, timber sales and other forest management activities as well as (2) appreciation of the land and standing forest.

Last week, NCREIF announced year-to-date (through Q2 2012) total returns for private US timberlands of 0.97%.  This total return number includes 1.54% from income and -0.57% from appreciation.  Alternately, publicly-traded timber REITs, as measured by the Forisk Timber REIT (FTR) Index, generated year-to-date total returns (through July 27, 2012) of 19.93%.  As of July 27, 2012, the four timber REITs provided the following dividend yields:

  • Plum Creek (PCL): 4.15%
  • Potlatch (PCH): 3.69%
  • Rayonier (RYN): 3.50%
  • Weyerhaeuser (WY): 2.54%

However, timberlands-versus-timber REITs is not an acorn-to-acorn comparison. For multi-year investors, direct ownership of timberlands continue to provide superior capital preservation and diversification, while public REITs offer superior liquidity and total returns with more risk.  While timber REITs attract attention from dividend-seeking investors, the figure below highlights the advantages and disadvantages of focusing solely on dividend yields (income) when investing in equities.  Equity values can and will dive with the overall market (see 2008-2009) while long-term investors gained through buy-and-hold-and-dividend reinvestment strategies.

Reminder: Early registration for “Timber Market Analysis” ends August 1st.  This one day course will be taught August 15th in Atlanta. Click here for more information

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Wood Bioenergy: Location Dictates Investment Potential

11 07 2012

Regardless the policy mandates and investor interests, regional analysis of US bioenergy markets highlights how specific geographies provide superior access to raw material and infrastructure resources for supporting high growth investment opportunities.  The costs associated with locating and building wood bioenergy projects can exceed those to build and operate (in terms of dollars per unit of electricity output) natural gas or coal plants.  As such, factors determining the success and failure of projects matter.  And these factors differ by geographic region and technology type.

In the current issue of Wood Bioenergy US (WBUS), Brooks Mendell and Amanda Lang focus on two aspects of regional wood bioenergy markets.  First, they review the potential demand for pulpwood and chips by region to address the question “where does wood bioenergy most directly affect timberland investors and forest industry procurement managers at pulp mills and OSB plants?”  Second, they evaluate the ability of regional markets to absorb and support new wood bioenergy projects by prioritizing regions with large, established, high-volume pulpwood markets, suppliers and the related infrastructure.  The results show how “market depth” helps explain why new wood bioenergy investment and projects migrate to different parts of the United States, especially the US South (see Figure).

National update: as of June 25 2012, WBUS counts 454 announced and operating wood bioenergy projects in the US with total, potential wood use of 125.4 million tons per year by 2022.  Based on Forisk analysis, 297 projects representing potential wood use of 73.5 million tons per year pass basic viability screening.  To download the free WBUS summary, click here.

For investors and analysts tracking bioenergy, wood and timber REIT markets, Forisk offers “Timber Market Analysis” on August 15th in Atlanta, a one-day course for anyone who wants a step-by-step process to understand, track, and analyze the price, demand, supply, and competitive dynamics of timber markets and wood baskets. For more information, click here





Timber REITs Accelerate Past the S&P 500 YTD for 2012

5 07 2012

As we hit midfield for 2012 and closed out the second quarter, the timber REIT sector as measured by the Forisk Timber REIT (FTR) Index posted a 12.09% gain relative to 8.31% for the S&P 500 (click here for the free FTR Weekly Summary).  While the year-to-date results vary by firm (see table), the sector benefited from (1) strong exposure to improving markets for homes and construction in key US regions and (2) attractive dividend yields relative to other industries and REIT subsectors.

For investors and analysts tracking wood and timber REIT markets, Forisk offers “Timber Market Analysis” on August 15th in Atlanta, a one-day course detailing a step-by-step process to understand, track, and analyze the price, demand, supply, and competitive dynamics of timber markets and wood baskets. For more information, click here