Are you wondering what the best Timber REITs and Timber REIT ETFs to invest in are? A real estate investment trust that focuses on timber investments is a good way to hedge yourself against inflation and it is an alternative investment to diversify your portfolio. I think an investment in this sector can really provide investors with some safety and a nice return on capital if done right. Agriculture and timber is becoming popular with savvy investors and I hope to show you some ways to get in the game.
Why Should I Invest in Timber?
An investment in a Timber REIT or Timber REIT ETF is an investment in trees and land, which is a finite resource – you simply cannot make more of it!
You are also gaining exposure to the rising price of timber, which has appreciated on average 5 percent a year for the past century.
The price of timber generally rises against inflation as well, so if you are worried about inflation like I am, investing in timber could make a good inflationary investment.
Inflation proof your portfolio you would want to include things like gold, silver, real estate, farm land investments and timber, as well as inflation linked bonds.
What are the Best Timber REITS?
So how does one gain exposure to the rising prices of timber? These REITS may be worth a look.
Note that some Timber REITS like to diversify their business into different segments - wood products, resource and real estate for instance.
#1 PCH Potlatch – PCH
Business Summary: “Potlatch Corporation operates as a real estate investment trust (REIT) that owns and manages timberlands located in Arkansas, Idaho, Minnesota and Wisconsin in the United States.”
This Timber REIT has a price of $42.50 per unit and yields 2.9 percent annually. They have a market cap of $1.72 billion.
Estimates for 2013 are about 1.30 earnings per share on total revenue of 543 million. I am somewhat bullish on this Timber REIT.
#2 Rayonier Inc (RYN)
Business Summary – “Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia.”
This Timber REIT has a price of $55 per unit and yields 3.2 percent annually. Their market cap is $6.76 billion.
Analyst earnings estimates for 2013 are 2.29 earnings per share on revenue of $1.66 billion. Last month, four analysts rated RYN as a strong buy, with one buy rating and three hold ratings.
I have a bullish outlook for this company.
#3 Weyerhauser Co (WY)
Business Summary – “Weyerhaeuser Company, a forest products company, grows and harvests trees, builds homes, and manufactures forest products worldwide. It grows and harvests trees for use as lumber, other wood and building products, and pulp and paper.”
This Timber stock is the biggest company mentioned with a market cap of $16.5 billion with a price of $30.5. The annual yield from the dividend is 2.2 percent.
Analyst estimates for 2013 are 1.01 earnings per share on revenue of $7.59 billion. The company had eight hold ratings and three strong buy ratings last month.
I am bullish on this company but not as bullish as I am on RYN.
There are two timber ETFs that I know of which track the overall timber market - the Guggenheim Timber ETF (CUT) and the iShares S&P Global Timber & Forestry Index Fund (WOOD).
CUT Fund Summary
“The investment seeks investment results that correspond generally to the performance, before the fund fees and expenses, of an equity index called the Beacon Global Timber Index…”
The fund has a year to date return of 25 percent and a 3 year average return of 6.67 percent. The annual yield is 1.25 percent with total net assets of $195 million..
Here are some of the companies that this Timber ETF holds in its portfolio:
Top 5 Holdings of CUT – West Fraser Timber (5.8 percent), Fibria Celulose (5.53 percent), Weyerhauser company (5.43 percent), Svenska Cellulosa (5.17 percent) and Smurfit Kappa (5.08 percent).
WOOD Fund Summary
Here’s another Timber ETF worth taking a look at. “The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Global Timber & Forestry IndexTM.”
The year to date performance has been stellar, returning 23.58 percent. The 3 year average return is 6.73 percent. This Timber ETF has an annual yield of 1.3 percent, holds $227 million in net assets, and has an expense ratio of just .48 percent.
Wood Holdings -
|PLUM CREEK TIMBER CO||7.41%|
|WEST FRASER TIMBER CO LTD||6.02%|
|FIBRIA CELULOSE SA-SPON ADR||4.77%|
Forest and Wood Investing – Need More Convincing?
Like I mentioned in the beginning of the article, timber investing provides a proven long term ability for an investor to preserve their capital, especially during inflation.
With the Federal Reserve printing money like theres no tomorrow, the bullish case for Timber this decade is in tact. Deflation is Ben Bernanke’s biggest fear and he will do everything in his power to prevent it.
I am convinced that inflation, not deflation, is the future for the United States.
I am out of the US dollar and into hard asset investments such as precious metals and stocks that are related to hard assets, such as these Timber REITs and ETFs mentioned above.
With 5 percent inflation annually and higher, which I think we are headed for, I feel that the price of timber has the potential to increase at least 10 percent a year because it is a desired commodity just like land.
I think oil, copper, platinum, palladium and coal will also do well going forward. I expect food prices to also rise during this time.
Thanks for reading this article on the best Timber REIT and TImber REIT ETFs to buy!