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CatchMark Timber Trust: 5% Yield, Housing Industry Access

Mar. 06, 2021 9:15 AM ETPotlatchDeltic Corporation (PCH)16 Comments


  • CTT supplies timber to saw mills for use as lumber and paper products.
  • 95% of its timberlands are located in high demand markets in the south.
  • CTT's 5.3% yield is highest among timber peers.
  • This article also details an attractive option trade yielding 9% in under six months.
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Housing stocks had been outperforming the market over the past year and in 2021 due to record low interest rates and pent-up demand. The recent rising rate scare has scaled them back somewhat, but the long-term outlook is still positive for the industry.

However, the problem for income investors is that homebuilder stocks generally don't offer attractive dividend yields. The top 5 dividend yields in the industry range from 1.2% to 2.8%, and that 2.8% is the only yield above 2%.

CatchMark Timber Trust (CTT) is a higher-yield alternative which you may want to consider. It's a REIT which "seeks to deliver consistent and growing per share cash flow from disciplined acquisitions and superior management of prime timberlands located in high demand U.S. mill markets."

CTT owns timberlands in Texas, Oregon and several southeastern states. Its biggest acreage is in Georgia, where it owns 250M acres. It also owns a 22% interest in the Triple T JV that has over 1M acres in Texas. Management has diversified the company's earnings, via adding an investment management segment to its Harvest and Real Estate operations:

(CTT Site)

Management has sought to diversify the company's earnings via a mix of Harvest, Real Estate, and Investment segment operations. The end uses of its timber cut across several industries, while the harvest mix is 58% pulpwood and 42% saw timber:

(CTT Site)

Its customer base includes some of the biggest players in the lumber, paper, and packaging industries, including International Paper, Georgia Pacific, and WestRock, with its top eight customers comprising 58% of annual timber sales:

(CTT Site)

In the U.S. South, 91% of CatchMark's total timberlands are located in three of the top five markets. This offers advantages in pulpwood and saw timber pricing, as well as in Site index, which is the height, in feet, of a softwood tree at age

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This article was written by

Double Dividend Stocks profile picture
Robert Hauver, MBA, aka “Double Dividend Stocks” was VP of Finance for an industry-leading corporation for 18 years and has been investing for more than 30 years. He focuses on undercovered and undervalued income vehicles and he leads the investing group Hidden Dividend Stocks Plus he scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10% or more, backed by strong earnings. Features include: a portfolio with up to 40 holdings at a time including links to associated articles, a dividend calendar, weekly research articles, exclusive ideas, and trade alerts.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CTT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (16)

Long term LONG on CTT and ACAZF. Was happy when Plum Creek was much more of a pure play and unhappy with WY so got out. I live on my land in Alaska which produces no income so collect the dividends on CTT & ACAZF...
"Its biggest acreage is in Georgia, where it owns 250M acres."


The Georgia holding is 250,700 acres, not 250 MILLION acres.

Sartre profile picture
@Nescience "M" is a roman numeral which denotes 1,000 and "MM" denotes 1 million. Were you absent from school that day they thought roman numerals.
Sartre profile picture
@Sartre taught (not thought) and ? Automatic speller, yuck!
Good Morning Double,
Thanks for posting. I am a little pressed for time and unable to research this further:
In 2020, Triple T paid Georgia-Pacific $145 million for the renegotiated wood supply agreement.
Is the $145 million correct? If so, what were the prices they were receiving and what are the new prices they expect to receive?
Double Dividend Stocks profile picture
From CTT 10K: "In June 2020, we invested an additional $5.0 million in the Triple T Joint Venture on the same terms and conditions as our original investment in connection with amendments to the joint venture agreement and asset management agreement. The proceeds of our additional $5.0 million investment, along with the proceeds from $140.0 million of borrowings under the Triple T Joint Venture’s secured, non-recourse credit facility, were used to make a payment of $145.0 million to GP in connection with an amendment to a wood supply agreement between the Triple T Joint Venture and GP. The supply agreement between the Triple T Joint Venture and GP was also extended by two years from 2029 to 2031, allowing for the Triple T Joint Venture’s harvest volume obligations to be further optimized to enhance and preserve long-term a"

The new agreement allows Triple T to achieve market-based pricing on timber sales, vs. fixed pricing.
Thanks for reading and commenting,
RightWingAnon profile picture
Housing will be under serious pressure if rates continue to rise. The wildcard in all of this is the timing of which the Fed will implement some sort of yield curve control.
Double Dividend Stocks profile picture
It depends upon how much the rates rise.
A moderate rate rise shouldn't kill demand, which is strong at this point.
Thanks for reading and commenting,
I have to imagine they've been benefiting by the cost of lumber rising. In the event of a decline in the cost of lumber will dividends being jeopardy?
RJCogburn profile picture
@John kilgore1 WSJ, Feb 25.
If you don't have access....a few snippets (one might have expected the author of this SA piece to be aware of this, but perhaps not....)

Timber growers across the U.S. South, where much of the nation’s logs are harvested, have gained nothing from the run-up in prices for finished lumber. It is the region’s sawmills, including many that have been bought up by Canadian firms, that are harvesting the profits.
The problem for timber growers is that so many trees have been planted between the Carolinas and Texas that mills are paying the lowest prices in decades for logs.
The surplus of standing pine is such that growers, foresters and mill executives expect that even with mills sawing at capacity and new facilities coming online, it could be another decade, maybe two, before enough trees are felled to balance supply with demand.

Double Dividend Stocks profile picture
Yes, we're aware of the WSJ article, which reinforces CTT's advantage.
From our article: "In the U.S. South, 91% of CatchMark’s total timberlands are located in three of the top five markets. This offers advantages in pulpwood and saw timber pricing." CTT enjoys a 63% price advantage for pine pulpwood, a 31% premium for chip and saw pine, and a 9% premium for pine sawtimber in the Southern markets. There's a graph near the start of this article, which details these comps.
Thanks for reading and commenting.
Double Dividend Stocks profile picture
@John kilgore1
Never say never, but they do have a steady track record: "management has kept the quarterly dividend at $.135 since Q2 2016."
Thanks for reading and commenting.
“Money doesn’t grow on trees son”, my father used to admonish me. Well with CTT it certainly does. I’ve owned it just for the dividends. Plant your own “money tree”.
Double Dividend Stocks profile picture
@alan dagian
Thanks for reading and commenting.
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