The two largest private sector owners of timberland in the United States, Plum Creek Timber Co. Inc. (PCL) and Weyerhaeuser Company (WY) are both classified as Real Estate Investment Trusts (REIT). They each present interesting investment opportunities both because of their classification and their business holdings.
REIT’s are securities that sell on an open exchange and invest in commercial and residential real estate as well as mortgages. Because of their special classification they often receive tax breaks and pay out strong dividends. Plum Creek became the first REIT specializing in timber in 1999 and Weyerhaeuser followed suit ten years later.
Although Plum Creek was the first to convert to a timber-specialized REIT, it is currently in a position where some analysts are hesitant to invest. Revenues rose twenty one percent in the last year, above the industry average, but this coincided with a decline in earnings per share. This trend has seemed to been noticed by the markets which have reacted strongly. PCL recently entered oversold territory as its relative strength index fell below thirty.
