The housing market is still going strong, and one way investors can play it is through Rayonier Timber stock. The timberland company is based in the southern U.S., one of the strongest markets for housing. On top of this, Rayonier Inc. (NYSE: RYN) is the second largest timberland REIT with around 2.7 million acres.
Not only is Rayonier a way for investors to gain exposure to the wood industry, but it also controls a growing real estate segment. The diverse portfolio mix gives the company a strong position in their market.
As demand for housing remains strong, the company is capitalizing on the increase. But, can the company keep up the rapid growth if housing slows?
Rayonier stock is up over 90% since its lows in March 2020. Keep reading to see how it plans to keep rewarding investors.
What Does Rayonier Do?
You may be wondering what a timberland REIT is. Rather than profiting from real estate such as buildings, a timberland REIT manages, well, you guessed it, timberlands. In fact, the company is the fourth largest private owner in the U.S.
It has two main areas in timberland and real estate.
Rayonier’s timber segment is its primary revenue stream. The company invests and manages the land. In fact, Rayonier stock was established as a “pure-play” timberland company. Meaning it’s a way to invest in the market.
The company isn’t involved in other forestry services like paper so they can focus on a single cause. Thus, investors benefit when there’s high demand for timber products, such as in today’s case.
Additionally, it controls three segments. These include Southern Timber, Pacific Northwest Timber, and New Zealand Timber.
When you think of real estate, many investors assume homes or rentals. But, in Rayonier’s case, it deals with timberland forests. Moreover, the company will sell its land for a better opportunity. It will also buy land when the opportunity is there. For example, the company can use its real estate property for things like:
- Higher or better usage (HBU)
- As an investment or,
- For renting purposes
This gives them the flexibility to sell property when they need cash. On the other hand, it also trades logs to enhance profits.
Rayonier’s Stock is in a Trending Industry
Rayonier stock and the timberland industry are trending on Wall St. Investors continue to profit from the rising demand for wood. In particular, the strong housing market is helping boost Rayonier’s earnings. Here are a few trends shaping the industry.
1) Demand for Real Estate
The most important trend influencing the industry and Rayonier stock is the high demand for homes. New information from the U.S Census Bureau shows that housing starts increased another 17.4% last month. Also, existing-home sales decreased by 2% in August. The trend suggests people are not selling homes as much as building new ones.
The news is positive for Rayonier shareholders as it can help boost the company’s business.
2) Technological Advancements
Advancements in tech are also a part of the company’s growth. High tech equipment like drones make it easier for companies to manage their land.
As the land is more efficiently used, it can help to increase profit margins.
3) Supply Chain Challenges
The pandemic is still causing issues across the globe. Not to mention events like hurricanes and wildfires can also slow production.
On top of this, the pandemic caused the company to halt operations in New Zealand due to government requirements. The stoppage was a big loss for the company as it had to close its doors for over a month.
Striving for Sustainability
A particular area of focus is sustainability. And it’s a good thing because the forest industry is critical for the future. With over 2.7 million acres of land, the company holds a lot of responsibility. Forest management has many aspects. It involves maintaining soil quality, protecting the species that lives there, and more.
Rayonier is heavily investing in the future of forestry by training employees to improve forest quality. Furthermore, the practice helps them support a growing need for wood.
On top of this, forests play a big role in maintaining carbon levels. As countries like the U.S are targetting to achieve carbon neutrality by 2050, Rayonier’s industry plays an increasingly important role.
How Rayonier Stock Can Benefit Shareholders
If you’re thinking, “okay, that’s great and all, but how does the company plan on generating returns?” You’re in luck, because as a REIT, the company’s purpose is to create value for Rayonier stock shareholders.
Rayonier is investing to make the company more profitable. Here’s how they plan on doing so.
- Active Portfolio Management. By investing in and selling at the right time, the company can maximize value. For instance, its latest acquisition gives them access to more timberlands in high-demand areas.
- Long Term Approach. Through sustainability efforts, it focuses on a long-term approach to forestry. The strategies will likely pay off in the future as many forests are being depleted.
- Diverse Lands. Rayonier does business in two of the fastest-growing housing areas in the south and the western U.S. It also operates in New Zealand. The variety helps the company overcome challenges like extreme weather events.
- Balanced Market. The company has a good balance of buyers. It currently caters 33% in the U.S, 39% export and another 28% are traded.
On top of all this, it also offers an attractive dividend for investors. The company currently offers a dividend of $0.27 paid quarterly. In other words, a dividend yield of just over 3%.
Rayonier Stock Forecast
The big question surrounding Rayonier is will demand for housing stay high. Already up 24% on the year, RYN stock looks to continue growing.
If the strength in housing can continue, investors should continue to see the rewards. The company’s mission to create value for shareholders is starting to pay off, with revenue growing 40% YOY to 291.4 million in the second quarter.
But, if the housing market cools off and there’s less demand for wood, investors could continue to see volatility. In this case, investors should be prepared for a lower return because the share price is up on strong demand for its products.
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About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.