I said flu-y because I didn't think it was actually the flu. Thanks for the emails and comments.
A reader left a question about my timber exposure, what and why.
The what is Plum Creek Timber (PCL). It is structured as a REIT, yields in the neighborhood of 4% and it owns timber-land all over the place.
I first learned about PCL in 1990 when it was still a master limited partnership. I was working at Lehman Brothers at the time and that it was a good diversification tool was part of the pitch, but at the time I didn't really understand what that meant.
Timber has a long track record for its low correlation to equities. If you do a search for Jack Meyer or Harvard Endowment you'll find plenty of content where Meyer spells it out in better detail than I can. Meyer was the long time head manager at Harvard before leaving due to issues of pay raised by alumni.
PCL is a core holding across the board because of its diversification potential. I think this is an important component to a diversified portfolio.
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4 comments:
Timber also has favorable tax treatment...unlike most real estate assets, the dividends are treated as long-term capital gains (and not "rent") so receive a 15% max tax rate instead of a max 35% rate.
I'm somewhat surprised that other publically traded pureplay timber REITs have not been created...it's still primarily an institutional investment.
What about Rayonier (RYN)? They have a larger dividend and international exposure to New Zealand and Chile. It looks a little overbought at the moment, but is there another reason Plum Creek is a better choice (retirement or taxable accounts)?
I have the same question @ RYN....in addition to the above, remember Jeremy Grantham's prediction of Managed Timber being "ONE---of the two places to be for the next 7yrs"....However, one has to ask why IP would be sell at this time?
Rayonier is not a timber pureplay...they have some other non-REIT assets.
Timber prices are at all-time highs...which explains why IP is selling, to focus on papermaking. Doesn't mean timber is a bad asset, just that it generally makes sense for companies to focus on one thing or another.
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