I'm looking for some dividend payers for my parents and have been looking hard at Plum Creek Timber (PCL). Management seems to be solid, and the stock seems to have limited downside. In fact it looks to be somewhat range bound between $35 and $40. My folks are retired, so dividend payers make sense and with a yield in excess of 4%, PCL looks like it fits the bill. From where I sit, I see a lot of upside potential if the housing market improves, but little chance of losing principle or should I say, downside. JNJ used to be range bound similarly until a recent break out. So, I'm thinking of convincing the folks to take a stake in PCL around $37.50 and then buying double the stake around $35 if they should get that shot. Anyone out there know of some glaring problem with PCL? I know there are other Timber Reits, but PCL seems to be the best managed and likely the safest as many pension funds are loaded up on it. Maybe I'm missing something tax-wise?
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: 2972010: 2582011: 185Its 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
Take a look at Suburban Propane (ticker SPH). They are resellers of propane. They own the tanks they deliver to making it costly for customers to switch. They are down a bit due to competition from low cost natural gas. But they seem to be well managed and not likely to go away soon.Current yield is 8.96% (according to Google Finance). Its a reit and has extra income tax paperwork, but I avoid that by holding in an IRA.
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