Real estate investment trusts (REITs) are corporations that operate by purchasing and managing real estate assets. They have been popular with both institutional and independent investors for years.
A big reason for this popularity is that REITs allow investors to earn passive income from an asset class. REITs are corporations that operate by purchasing and managing real estate assets. They raise capital by selling shares in their corporation to investors, who then share in the profits based on the number of shares they own.
Although residential REITs are the most commonly known type of REIT, this investment sector has many options. One of those options is a timberland REIT. In a timberland REIT, companies buy large tracts of forest land and make money by selling products that can be derived from forest land.
Benefits of Investing in Timberland REITs
Timberland products have a number of potential commercial uses. Many of these commercial applications require wood, which means timberland REITs have a strong customer base that isn’t going anywhere in the near future.
The most obvious example of timberland REIT products would be lumber for construction, but lumber is only one of many profitable enterprises a timberland REIT can engage in. For example, if you’ve ever gone to the store and paid through the nose for a small bottle of authentic Vermont maple syrup, you know that owning shares of a REIT that owned maple trees in Vermont could be very profitable.
Other examples of profitable items a timberland REIT could produce include:
- Paper products
- Wood for furniture
- Wood for sporting goods such as baseball bats, hockey sticks and basketball courts
What this means for timberland REIT investors is that they have a strong, diverse client base that depends on wood and timber products. That should translate into steady returns. Another big benefit of investing in timberland REITs is that timberland is available in limited quantities. It takes many years for the forests that produce timberland products to mature, and they require large quantities of land. Both of these factors play into the favor of timberland REIT investors.
Risks with Timberland REITs
As is the case with any agricultural product, timberland REITs depend on favorable climate conditions. Factors beyond investors’ control such as drought or disease can decimate timberland. In the case of a prolonged drought, timber may become more expensive for the short term, but the lack of water poses a potentially lethal threat.
In addition to these risks, climate change could make the idea of harvesting large tracts of timberland problematic. Trees are plants — large plants — and as such they play an important role in cleaning the air everyone breathes by absorbing carbon dioxide. As the effects of climate change become more pronounced, many nations may pass legislation that makes chopping down trees illegal or more expensive through the application of surcharges, tariffs or carbon taxes.
Another potential danger for timberland REITs is downturns in the economy. Although timberland REITs produce a variety of products, their bread and butter product is wood for construction. That makes them heavily dependent on a strong housing industry, which can only exist when the economy is strong. When the economy slows, it depresses the new housing market with it, which could lead to diminished returns for timberland REIT investors.
How to Invest in Timberland REITs
Both accredited and non-accredited investors can take advantage of timberland investment through a brokerage app or the assistance of a stock broker. Check out Benzinga's list of the best stock brokers who can assist you with making timberland REIT investments.
Largest Timberland REITs
PotlatchDeltic (NASDAQ: PCH): This is one of America’s largest timberland REITs. It owns and operates nearly 2 million acres of timberland in several states, including Mississippi, Arkansas, Minnesota, Idaho, Louisiana and Alabama. PotlatchDeltic is at the forefront of sustainable forest management. It views this as an essential element of providing consistent returns to investors.
PotlatchDeltic’s current share price is $46.16. It has a market cap of $3.6 billion and an impressive 10-year return of 7.08%. Its current dividend yield is 3.94%.
Rayonier Inc. (NYSE: RYN): Raynonier is a large timberland REIT that has operations in the United States and New Zealand. It specializes in providing softwood products for various applications.
Rayonier’s current share price is $31.11. Its market cap is $4.6 billion and its 10-year return is 3.28%. Rayonier’s current dividend yield is 3.69%.
Weyerhaeuser Co. (NYSE: WY): Weyerhaeuser is one of the oldest and largest timberland REITs. It’s been in the timberland business since 1900, which is also why its name may be one of the most recognizable of all the timberland REITs. It either owns or manages 12.2 million acres of timberland across the U.S. and Canada.
Weyerhaeuser’s current share price of $31.58. Its market cap is $22.9 billion and its 10-year return average is 4.73%. Weyerhauser’s current dividend yield is 2.43%.
Timberland REIT ETFs
Exchange-traded funds (ETFs) also offer investors the ability to invest in timberland REITs, but there aren’t many options. Currently, the Guggenheim MSCI Timber ETF (NASDAQ: CUT) and the iShares S&P Global Timber & Forestry Index ETF (NASDAQ: WOOD) are the only two listed timber ETFs.
It should also be noted that both of these ETF’s businesses sell lumber-related products, such as paper, to fill out their portfolios. The reason for this is that the three timberland REITs profiled above are the only timberland REITS on the market.
Three REITs alone are not enough options to create an adequately diversified ETF. For this reason, investors who specifically want to invest in timberland REITs may prefer investing directly in their favorite timberland REIT instead of a timberland ETF.
Industry Overview
| Number of REITs | 3 |
| Average dividend yield | 2.70% |
| YTD total return | 7.56% |
| Latest month total return | -5.27% |
| 2023 total return | -19.48% |
Quarterly Performance Data
| Financial Metric | Latest Quarter | 2023 to Date |
| FFO ($M) | 0 | 0 |
| NOI ($M) | $719 | $1,346 |
| Dividends paid ($M) | $219 | $1,097 |
Investing in Timberland REITs
Overall, timber is a vital sector that provides the raw material for many of the most valuable consumer products. So, when you invest in a timberland REIT, you're investing in an industry that produces a product that’s in demand across multiple sectors of the economy. Everything from new homes to the cardboard boxes people use to move into them comes from wood harvesting.
The importance of lumber and wood products to the economy makes timberland REITs an attractive potential option for investors looking to build passive income. Although there isn’t a large variety of timberland REITs for investors to choose from, the bright side is that it’s very easy for investors to build their own diversified portfolio of timberland REITs.
Frequently Asked Questions
What are timberland REITs?
Are timberland REITs a good investment?
Timberland REITs can be a good investment because harvested wood is a raw material that is important to several industries, ranging from housing to paper products. In 2021, timberland REITs paid investors an average total return of 28.21%.
How do timberland REITs do in a downturn?
One of the most important products provided by timberland REITs is wood for new home construction. Generally, new home purchases suffer when the economy experiences a downturn, meaning timberland REITs could also suffer. But there is still an extensive list of products that depend on timberland for raw materials so timberland REITs may not suffer as much as some other economic sectors during a downturn.
About Savannah Munholland
Savannah Munholland is an investment writer passionate about helping people learn more about accessible alternative investments. She has more than three years of writing experience, focusing on alternative and traditional investing, technology, and education. Her expertise in writing about art and wine investments is grounded in an MFA with knowledge of and immersion in a wide range of art-related topics. She uses her skills in creative writing to bring an appealing level of interest to her journalistic work, shifting even the most basic financial and investment topics from humdrum to compelling. Her work has been published on Benzinga, FreightWaves, and Study.com.