OJO Zafado

Lumber and Forestry Companies: Building a Better Future

Your forestry/lumber picks are interesting. I have followed VCP and SinoForest. They have had great runs in an environment that has not treated NA paper,pulp and lumber very well. I was led to your blog by the teaser on your high yield picks. In a combined theme I would mention that I own CFPUF,ATBUF, and TWTUF the Canadian pulp, paper, OSB, biomass, lumber producers & nursery operators. They all have excellent yields. CFPUF has been hit hard again post the Loonie's previous rise to 110. The Loonie is now surging again & up to +/- 102. This has hit CFPUF again. These are becoming great value plays as even if dividends are cut they are structured as trusts (As you mentioned PWE which I also own) and will continue to pay comparitively high dividends that are mostly 15% tax qualified. TWTUF is an exception as it's dividend is actually an interest payment on a bond. This perhaps creates an advantage for tax sheltered accounts. ATBUF has already announced plans to convert to a REIT, before the 2011 tax change you mentioned. I believe it is woth $14/sh on the ultimate recovery in 2010? in the US housing market. Also looming on the horizon are the 2010 Winter Olympic Games in Vancouver/Whistler-Bla... There is going to be a small building boom in PAC/NW Canada, that has already begun with big investment in the highway connecting to the mountain venues. I just added another partial position to CFPUF last week at $8.98 US$. The current C$0.12/month dividend may in fact be unsustainable due to Loonie strength, and be again reduced to C$0.10 from the current C$0.12. That would leave you a +13% dividend which after taking the 15% tax allowance would still yield 11.35% tax advantage @ he 15% rate. The tax is then recoverable on your US tax return as a foreign tax credit. Forestry products are the last of the commodities to still not have participated in the huge global commodities rally. When this situation reverses this stuff including your picks is going to soar. Look at a chart of DBA as an example. I just prefer the Canadian companies not just for their strong dividends while awaiting the market turn, but also for their permanent unfair trade advantages and Gov't subsidies. NAFTA is not unfair!