Timber REITs are recommended as a two-to-three-year, medium-to-long-term play on a U.S. housing recovery with large, liquid companies that often have good balance sheets and are paying a dividend yield today, says Joshua Barber, an Analyst at Stifel Nicolaus & Co., Inc.
“We favored that group for a little while, just in the sense that they trade at bigger discounts to net asset value than virtually any other real estate asset class, although there are probably some good reasons for it,” he said. “They also are among the more economically sensitive ones, particularly to the housing market.”
Barber has a “buy” rating on Rayonier Inc. (RYN), which within the timber REIT space is his top pick. He describes Rayonier as the least home-construction sensitive among the timber REITs, and says a large percentage of its business comes from specialty dissolving pulp, which has been a great growth engine for RYN for the past four or five years.
“They have a great balance sheet, they have a wonderful management team, and we think that the dissolving pulp business has some pretty good growth left, especially with that mill conversion next year. So we like the earning there,” Barber said.