Forest products companies offer an investing alternative
Consider the following 3 companies, operating in the fickle yet vital forest products industry, as possible additions to your holdings:
1. Canfor Corporation
Canfor Corporation (TSX:CFP) mainly produces softwood lumber. The company also produces bleached chemi-thermo mechanical pulp and specialized wood products.
Acquisitions: Canfor is adding capacity via acquisitions. In 2013, it completed the initial phase of a 3-year purchase agreement to buy Scotch & Gulf Lumber, LLC of Alabama.
Asia demand: In 2013, Canfor's lumber shipments to China reached over 1 billion board feet for the second year consecutively. Additionally, the company experienced higher value, more volume and increased market share in Japan in 2013.
Q2 2014 results: For Q2 2014, Canfor reported net income of $54.3 million, versus $45.5 million for Q1 2014 and $110.3 million for Q2 2013. Canfor's lumber shipments were more than 1.2 billion board feet. This represents an increase of 33% from Q1 2014. This was due to improved railcar availability and increased offshore shipments.
Dividends: Canfor has not paid a dividend since 2006.
2. West Fraser Timber Co. Ltd.
An integrated wood products company, West Fraser Timber Co. Ltd. (TSX:WFT) produces lumber, wood chips, laminated veneer lumber, medium density fibreboard, plywood, pulp and newsprint.
Acquisitions: In 2014, West Fraser acquired Travis Lumber Company's sawmill and lumber manufacturing operations in Mansfield, Arkansas. It also entered into an agreement to acquire the Bibler Brothers Lumber sawmill and lumber manufacturing operations in Russellville, Arkansas. West Fraser also announced the completion of the acquisition of Buchanan Lumber sawmill in High Prairie, Alberta.
Q2 2014 results: For Q2, West Fraser's lumber operations generated operating earnings of $81 million versus $79 million in Q1. Earnings before Interest, Taxes, Depreciation and Amortization was $106 million versus $107 million in Q1.
Dividends: West Fraser Timber pays a quarterly dividend and its current dividend yield is 0.60%. The company's annual payout is $0.28
3. Weyerhaeuser Co.
A real estate investment trust, Weyerhaeuser Co. (NYSE:WY) owns or controls close to 7 million acres of timberlands, mainly in the U.S. It also manages14 million acres under long-term licenses in Canada. Weyerhaeuser is also one of the largest manufacturers of wood and cellulose fibres products.
Real estate segment: Weyerhaeuser develops real estate, chiefly as a builder of single-family homes. It also develops residential lots for its use and for sale. Its real estate operations include Maracay Homes (Phoenix and Tucson, Arizona), Pardee Homes (California and Nevada), Quadrant Homes (Washington State), Trendmaker Homes (Houston, Texas), and Winchester Homes (Maryland and Virginia suburbs of Washington, DC and Richmond, Virginia).
Acquisitions: Weyerhaeuser acquired Longview Timber LLC in 2013. This added 645,000 acres of timberlands in the Pacific Northwest to its portfolio.
Q1 2014 Results: For Q1, Weyerhaeuser had net earnings of $183 million on net sales of $2.0 billion, versus net earnings of $144 million, on net sales of $2.0 billion for Q1 2013.
Dividends: Weyerhaeuser pays a quarterly dividend and its current dividend yield is 2.80%. The company's annual payout is $0.88.
Forest product companies are dependent on a robust North American housing market and overseas demand. While not an investing option for the faint of heart, these companies do have upside that more daring investors should consider to diversify a portfolio.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.