Best Timber REITs

Investing in Timber REITs is a straightforward way to gain exposure to the timber and forestry industry without the complexities of directly owning and managing land. These publicly traded real estate investment trusts allow individuals to invest in large-scale timber operations, which generate income through timber sales, land leases, and other forestry-related activities.

Timber REITs are traded on major stock exchanges, making them accessible to most investors. They offer the potential for steady dividend income, portfolio diversification, and a natural hedge against inflation, as timber prices often increase during inflationary periods. By understanding the fundamentals of timber REITs and evaluating their performance and market conditions, investors can incorporate this unique asset class into their portfolios with ease.

What are Timber REITs?

Timber REITs (real estate investment trusts) are companies that own, manage, and operate timberland for commercial purposes, primarily focused on growing, harvesting, and selling timber. These REITs generate income from the sale of wood products, land leases, and, in some cases, the development of land for other uses.

As publicly traded entities, timber REITs allow investors to gain exposure to the timber industry without directly owning or managing land. They are known for their ability to provide steady cash flow, long-term growth potential, and natural inflation hedging, as timber prices often rise with inflation.

Benefits of Investing in Timberland REITs

Investing in timberland REITs offers several unique benefits, making them an attractive option for diversifying a portfolio. Key advantages include:

1. Steady Income: Timberland REITs generate consistent cash flow through timber sales, land leases, and other revenue streams, often paying reliable dividends to investors.
2. Inflation Hedge: Timber prices typically rise with inflation, providing a natural hedge against the erosion of purchasing power.
3. Portfolio Diversification: Timberland REITs are less correlated with traditional asset classes like stocks and bonds, helping reduce overall portfolio risk.
4. Sustainability: Timber is a renewable resource, and many REITs follow sustainable forestry practices, making them appealing to environmentally conscious investors.
5. Long-Term Growth: As timber continues to grow until harvest, it appreciates in value over time, offering both income and potential for capital appreciation.

Risks of Investing in Timberland REITs

Investing in timberland REITs comes with certain risks that investors should carefully consider before adding them to their portfolio. Key risks include:

1. Commodity Price Volatility: Timber prices can fluctuate due to changes in supply and demand, weather conditions, housing market cycles, and global trade dynamics, which may affect the REIT’s revenue.
2. Market Cycles: Timberland REITs are influenced by the health of industries like construction and paper production. Economic downturns or a slowdown in housing construction can reduce demand for timber.
3. Natural Disasters: Wildfires, storms, pests, and diseases can damage timberlands, leading to financial losses and operational challenges for timberland REITs.
4. Environmental Regulations: Changes in environmental laws, conservation requirements, or zoning restrictions could impact timberland operations and profitability.

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

Discussed below are some of the largest timberland REITs:

PotlatchDeltic (NASDAQ: PCH)

PotlatchDeltic 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 $41.71. It has a market cap of $3.3 billion and an impressive 1-year return of 7.75%. Its current dividend yield is 4.28%.

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 $26.30. Its market cap is $3.97 billion and its year-to-date return is 1.58%. Rayonier’s current dividend yield is 4.34%.

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 $29.99. Its market cap is $21.8 billion and its year-to-date return is 7.53%. Weyerhauser’s current dividend yield is 2.64%.

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 ETFs' 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 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

Quarterly Performance Data

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