No 'Lost Decade' for Timber Companies

 |  Includes: DEL, PCH, PCL, POPE, RYN, TMWEF, WY
by: George Fisher

There has been a lot of talk about the “lost decade” for stock investors. However, as Roberto Clemente once said, “Timber has been very good to me.” In reviewing stock performance for various timber companies over the past 10 years, it is clear that most have rewarded investors with more than acceptable returns relative to the S&P 500.

Analyzing 10-yr returns for several timber companies is a thoughtful exercise because it entails not only capital gains but cash distributions as well. Most firms are structured as REITs or MLPs, and for those that converted to this structure over the decade, investors usually received an added distribution. While there are tax implications to the categorization of cash distributions, such as return of capital or pass-thru of tax liability, distributions are listed as paid.

I selected seven companies to review, three larger and four smaller. Rayonier (NYSE:RYN), Plum Creek Timber (NYSE:PCL) and Weyerhaeuser (NYSE:WY) are grouped together, as is Pope Resources (NASDAQ:POPE), Deltic Timber (NYSE:EL), Potlatch (NASDAQ:PCH), and TimberWest (OTC:TMWEF).

Listed below are the companies, total distributions per share since Nov 2000, special dividends included in the distributions, stock price as of Nov 22, 2000 adjusted for stock splits, and the stock price on Nov 22, 2010. Combined capital gains and income is listed, as is 10-year returns. Also listed is a comparison to SPY, the S&P 500 Index ETF.






Cap Gains+Income

10-Yr Returns




















































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For example, an RYN investor would have paid $19.69 in 2000, adjusted for two 3:2 stock splits, and received $25.14 in regular distributions, along with $4.41 in special distributions, for total distributions of $29.55. Share price would be worth $51.25 today. Combined capital gains and distributions is $61.11, which represents a 310.4% return.

In the process of converting to a REIT, RYN paid a special distribution in ’03, and WY did as well during their conversion this year. DEL has paid a series of special distributions about every two years since 2004.

10-yr share price performance for RYN, PCL, WY, along with the S&P:

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10-yr share price performance for POPE, TMWEF, DEL, PCH, along with the S&P:

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While some investors lament about how poorly the market has performed, selective sectors have done quite well. Although past performance is no guarantee of future returns, timber investments should be part of one’s portfolio for diversification, income and capital gains potential. If timber companies are not part of your portfolio, conducting due diligence would be a worthy endeavor.

As always, investors should conduct their nown due dilligence, should develop their own understanding of these opportunities and dertmine how they may fit into their current financial situaiton.

Disclosure: Long RYN, WY, POPE, TMWEF.PK