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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Re: Plum Creek Timber Date: 8/26/2012 10:37 PM
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I would not be a buyer of PCL.

As a Timber REIT, since its first full year of operations as a REIT in 2007, 100% of its distribution have been long term capital gains, which means that to support its current annual $1.68 dividend, it must continue to sell its properties. Sales (in thousands of acres) have been:

2009: 297
2010: 258
2011: 185

Its land holdings have dropped from a bit over 8MM acres in 2006 to 6.6MM today. They cannot sell land to fund dividends indefinitely.

Its free cash flow (a much better measure of a REITs financial health than EPS) has been steadily declining since 2007.

If reliable income is what they seek, I would stick with income ETFs that can diversify holdings and limit exposure to individual stocks that could reduce or eliminate their dividends. Here are some examples:

XLU (utilities) currently yields about 3.7%
VNQ (REITs) has a CY of about 3.2%
DVY Mid cap dividends with CY of about 3.6%
SDY with long term dividend paying stocks with a CY of about 3.2%
VYM a large cap dividend paying ETF with a CY of 3.3%

If individual securities is what you are after, I'd look at healthcare REITs like HCP, VTR or HCN. Best yields would come from one of the MLPs, such as PAA, KMP, EPB or MMP, all with yields from 4.7 to 5.8%. However, MLPs have tax issues that you would need to understand before buying.

BruceM
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