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Timber real estate investment trusts (REITS) are historically some of the best-performing real estate investments and are excellent options for regular investment income.
Whether you’re looking for significant gains or steady cash flow, these are the best timber REITs to purchase in 2023.
Top 7 Best Timberland REITs
- Weyerhaeuser – Best timber REIT
- Rayonier – Best forestry REIT
- PotlatchDeltic Corp – Best timberland REIT
- Boise Cascade – Best lumber REIT
- iShares Global Timber & Forestry ETF – Best timber REIT ETF
- West Frasier – Best timber REIT stock
- UFP Industries – Best timberland stock
Forestry REITs are unique and operate differently from most real estate investments. They rely on the sale of timber for the majority of their income as opposed to rent.
When choosing lumber REITs for this list, we looked at the following criteria:
- Annual dividend yield: Dividend ratios should be low enough to suggest that a company is investing in its future but not so low that profits are struggling.
- Stock price: Stock prices should have increased significantly in 2021 when lumber prices rose to unprecedented highs.
- Level of risk: Companies should be taking enough risks to increase profits without disregarding their investors’ trust.
- Growth opportunities: We looked for companies with investments in key growth markets.
- Portfolio diversity: Companies should have horizontal or vertical integration to protect investors in the case of volatility in one market.
- Forest management: Sustainable forestry practices are the timber industry’s future, and companies should be working toward future regulations.
Weyerhaeuser (WY) – Best Timber REIT
Weyerhaeuser Company (NYSE: WY) was founded in 1900 as a timberland company in Tacoma, Washington. The company has grown to include more than 11 million acres of land in the U.S.
Weyerhaeuser has a highly diversified portfolio that includes land in different regions of the US and Canada. It has further diversified by selling logs and seedlings.
It has an annual dividend yield of 2.26%, which suggests a balance between reinvestment and investor support.
Weyerhaeuser focuses on sustainable forestry to ensure that future generations will have the same access to lumber that we currently enjoy.
Why we chose Weyerhaeuser: WY has more than a century of experience, giving it unique insight into forest management and business.
Its highly diversified portfolio includes land from all over North America.
Rayonier Inc. (RYN) – Best Forestry REIT
Rayonier Incorporated (NYSE: RYN) was founded in 1926 in Washington state. Today, it manages 2.7 million acres of timberland in the U.S. and New Zealand from its headquarters in Florida.
Rayonier Inc. has an annual dividend yield of 3.26%. Its thorough acquisition strategy makes it adept at finding and purchasing high-value real estate.
Why we chose Rayonier Incorporated: Rayonier has a highly diversified and extensive portfolio, which gives it leverage in the event of a downturn and enough capital to continue growing.
PotlatchDeltic Corp (PCH) – Best Timberland REIT
PotlatchDeltic (NASDAQ: PCH) manages over 2 million acres of land and seven manufacturing facilities, including sawmills.
PotlatchDeltic has a strong balance sheet and a range of timberlands that is geographically diverse. The company maintains a dedicated focus on sustainability and responsible forestry practices.
With an annual dividend yield of 3.8%, PotlatchDeltic is one of the highest-yield companies on this list. Investors can likely expect significant dividends in the coming year.
Why we chose PotlatchDeltic: PCH has continued to expand while providing investors with solid cash flow.
Boise Cascade (BCC) – Best Lumber REIT
Boise Cascade (NYSE: BCC) was founded in 1957. It initially focused on growing and harvesting lumber and then expanded to include limber mills and wood products, such as paper.
Boise Cascade is a Fortune 500 company with nearly $8 billion in annual revenue. It had its initial public offering on the New York Stock Exchange in 2013.
Boise Cascade is a highly diversified company that has always focused on vertical integration of its products. This gives the company an edge in the current acquisition-focused market.
Boise Cascade has an annual dividend yield of 0.83%. While this might be concerningly low for a smaller company, in this case, it suggests that Boise Cascade is strongly reinvesting for future profits.
Why we chose Boise Cascade: Boise Cascade is highly diversified and focuses on all aspects of lumber, including paper and lumber shipping and distribution.
It has a history of outperforming the market, even when the market is uncertain.
iShares Global Timber & Forestry ETF (COR) – Best Timber REIT ETF
BlackRock is one of the largest, highest-return investment conglomerates in the world. iShares Global Timber & Forestry has 29 holdings with more than $200 million in assets.
The company has grown significantly in recent years and shows no signs of slowing. As an ETF stock, iShares Global Timber & Forestry is not required to pay dividends and has chosen not to do so.
Despite this, WOOD is a good investment for those who want to invest for stock prices rather than dividends.
Why we chose iShares Global Timber & Forestry: This ETF is backed by BlackRock and is highly diversified. Even though it doesn’t pay dividends, the stock price will likely continue to rise.
West Frasier (WFG) – Best Timber REIT Stock
West Frasier (TSE: WFG) was founded in 1955 in Quesnel, Canada. It has a highly diverse wood product portfolio that includes facilities in the US, Canada, and the U.K.
West Frasier focuses on sustainability and responsible forest management, specifically focusing on fully utilizing every piece of wood it harvests.
This practice benefits the planet and investors as it maximizes profits from all parts of the lumber.
West Frasier has an annual dividend yield of 1.48%, demonstrating that it is reinvesting for future acquisitions.
Why we chose West Frasier: Its sustainable practices and diversity, combined with its reinvestment strategy, make it one of the best stocks for long-term investors.
We believe this stock is a good choice.
UFP Industries (UFPI) – Best Timberland Stock
UFP Industries (NASDAQ: UFPI) was founded in 1955 in Grand Rapids, Michigan. While its headquarters remain in Grand Rapids, the company now has more than 211 locations globally.
UFP Industries has historically worked on vertical integration of its products and has investments in the retail, industrial, and construction sectors.
This strategy earned UFP more than $8.5 billion in net sales in 2021. UFP has an annual dividend yield of 1.29%, which shows that it is highly invested in growth for the coming year.
Why we chose UFP Industries: This company has many diversified assets and continues to focus on future growth.
What Are Timber REITs?
Timber REITs, like other REITs, acquire and manage profit-creating commercial real estate properties. However, unlike other REITs, timber REITs focus on forest land for logging and timber.
Timber REITs can also be involved in the following lumber processes:
- Lumber mills
- Manufacturing wood
- Land conservation
- Selling timber
Benefits of Timber REITs
Because of their unique market placement, REITs have many benefits that aren’t seen in other investments.
Portfolio diversification – Because they contain multiple real estate properties, REITs have built-in diversification.
Timberland REITs, in particular, offer a unique commodity that isn’t usually represented in stock portfolios.
Growing population – Because housing is the leading purchaser of lumber, a continuously-growing population drives up timber prices — and profits of lumber REITs.
Increased demand – The demand for new housing (and lumber) continues to grow due to the growing population, the housing market crisis and people who work remotely who are moving to more rural homes.
Inflation hedge – Because lumber is a commodity, its price tends to go up when inflation rises. This means your investment will likely keep pace with rising costs.
High-dividend yields – Many timberland REITs have high dividends that provide investors with cash flow.
Risks of Investing in Timber REITs
While their unique market position gives timber REITs many unique advantages, there are also a few unique risks.
Climate change – Climate change and its resulting environmental effects (wildfires, slow forest growth, etc.) mean that there are stability and success factors outside of the REITs’ control.
Low lumber prices – Lumber prices have been high in recent years, but if the prices drop, profits from lumber REITs could significantly decline.
This dependency on lumber prices makes timber REITs more volatile than other types of REITs.
Rising interest rates – The housing industry is one of the largest purchasers of timber. Demand for lumber goes down when interest rates rise, and timber REIT investors suffer.
Rising interest rates can also make capital more expensive for REITs, which can make it challenging to obtain new properties and continue to grow.
How to Invest in Timberland REITs
All the REITs on this list are stock market traded, meaning they can be bought and sold like common stock. Follow these steps to easily invest in the stock market:
- Choose where you want to open an account: Many places allow you to open an investment account with a small or no minimum. Many have bonuses, such as free stock or discounts on your first investment.
- Open an investment account: Your brokerage will guide you through opening your account. It is best to have your financial information, ID and social security number readily available before you start.
- Set a budget: Knowing how much you want to invest is crucial. Never invest more than you can afford to lose.
- Invest: You can now buy stocks.
- Timberland REITs offer investors a hedge against inflation, making them excellent choices for those concerned with market volatility.
- Dividend stocks, such as REITs, can provide cash flow that investors can reinvest or take as cash.
- Invest now while stock prices are low to get the best returns for 2023.
Timber REIT FAQs
These are the most common questions about timberland REITs.
Are timber REITs good investments?
Timber investments are solid choices for the coming year as demands for lumber products rise.
What returns can I expect from a timber REIT?
Investors can expect a 0.6% to 5% dividend yield from timber REITs. This is equivalent to a quarterly payout of roughly $0.10 to $0.50 per share, depending on the stock price.
What is the difference between a timber REIT and a timber company?
Timber REITs are companies invested in multiple timberlands and forests that claim profits from logs and resources sold from the land.
Timber companies typically own one or a few properties and do not pay as much in dividends to investors.