If You Want Income, Consider Timber Stocks
NEW YORK (TheStreet) -- Have you noticed how red-hot the timber sector is?
Timber stocks and real estate investment trusts have been in demand largely because they're seen as a play on the recovery of the housing market.
What's more, they pay big, fat, juicy dividends, which makes them attractive when Treasury bonds are yielding so little.
One timber REIT that has rewarded me in the past is Rayonier Inc.(RYN) , which was recently trading at $45.56, a couple of dollars less than its 52-week high of $47.56.
This is a profitable company that buys and develops real estate and manages timberland. It also produces and sells cellulose fibers in the U.S., New Zealand, and Australia.
This company plans to report second-quarter 2012 earnings on July 26, and it wouldn't surprise me if it met or exceeded analysts' expectations. Let's wait to buy in case it misses estimates, shall we?
As of the beginning of the year, Chairman and CEO Paul Boynton owned almost 269,000 shares, which have a current value of about $12.2 million. And as of July 1, chief administrative officer W. Edwin Frazer owned almost $9.9 million worth of shares.
So officers and directors are putting their money where their mouths are, and big investors such as Invesco Ltd. and The Vanguard Group each own more than 4% of the outstanding shares.
The stock pays a $1.60 annual dividend. Given the stock's current price, that translates into a 3.52% yield. Look at the one-year chart below, which shows both the stock's 200-day moving average and the Bollinger bands.
Chart courtesy of Yahoo! Finance
The 200-day moving average is right around $43, and the lower Bollinger band is near $42.
On June 13, 2012, the day after it paid its last quarterly dividend, it hit an intraday low of $42.46, and I have no reason to think it couldn't correct down to that level again.
If it does, the yield will rise 3.77% and you'll be buying shares of RYN at a 6.7% discount to where they closed Tuesday.
There are some other good names among the timber sector.
Potlatch Corporation(PCH) is a REIT that owns and manages timberland in Arkansas, Idaho, Minnesota and Wisconsin.
It also produces lumber, plywood, and particleboard. This REIT is certainly tied to the housing-recovery theme.