Rayonier: Asset-Rich REIT

05/15/2014 7:00 am EST

Focus: REITS

John Buckingham

Editor, The Prudent Speculator

We continue to believe that long-term investors should be optimistic about the prospects for US equities; valuations are reasonable, dividend payouts are on the rise, and investor sentiment is far from euphoric, suggests John Buckingham, value investor and editor of The Prudent Speculator.

Rayonier (RYN) is a leading international forest products company, structured as a Real Estate Investment Trust (REIT), operating with three core businesses: Timber, Real Estate, and Performance Fibers.

The company owns, leases or manages approximately 2.7 million acres of timber and land in the US and New Zealand.

Included in the domestic property is approximately 200,000 acres of high-value real estate located primarily along the coastal corridor from Savannah, Georgia, to Daytona Beach, Florida.

Its Performance Fibers business is one of the world's leading producers of high-value specialty cellulose fibers, which are used in products such as filters, pharmaceuticals, and LCD screens.

The company has been working through a spin-off of this business, which is expected to be completed mid-2014 and will be called Rayonier Advanced Materials.

Like management, we think the separation could potentially create two industry-leading companies with desirable long-term growth opportunities.

Certainly, we can never ignore the competitive challenges, but we think the asset-rich company is trading at an attractive discount to its fair value, especially as the Forest Resources business saw a spike in demand and pricing in its most recently reported operating period.

With a diversified business mix and a 4.3% dividend yield, plus the valuable Southeastern real estate kicker, we like Rayonier.

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