Forests Might Be The Hottest Asset Class You're Not Watching. They Pay A Return, Hedge Inflation And Provide Planet-Friendly Optics

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Timberland properties are becoming a go-to investment for the wealthy, and regular investors are starting to catch on.

An Overlooked But Powerful Portfolio Play

Timberland is giving investors a chance to earn steady returns, hedge against inflation and diversify their portfolios with a sustainable asset. “Forest investors are typically not looking for high risk and high return,” Campbell Global President Angela Davis told Forbes. They’re looking for yield, inflation protection, “environmental virtue” and something that doesn’t move with the stock market. The company, which was acquired by J.P. Morgan Asset Management in 2021, manages $10 billion in timberland.

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Davis oversees 1.4 million acres of timberland across the U.S., Australia and New Zealand. According to her, a properly managed forest can deliver around a 4.4% annual yield from harvested wood alone. Add long-term log price growth and carbon credit sales, and total returns can hit 7%.

“Let it grow. Sell a higher volume at a higher price later,” Davis told Forbes about her long-term approach to timber prices. Unlike public real estate investment trusts tied to mills, she can afford to be patient.

Even with all the natural obstacles like wildfires, pests, protected areas, and hungry bears, Davis says sustainable forestry still works. Her team of 75 foresters actively manages risk, cuts compromised trees, and builds firebreaks.

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Timber REITs Bring The Forest To Your Brokerage Account

Public investors don't have to buy land to get in. Shares of timberland REITs, like PotlatchDeltic Corp. (NASDAQ:PCH), Rayonier Inc. (NYSE:RYN) and Weyerhaeuser Co. (NYSE:WY) offer exposure without the hassle. These REITs pay dividends, and all are traded on major exchanges.

PotlatchDeltic had a 4.18% dividend yield, Rayonier offered a 4.56% yield, and Weyerhaeuser had returned 3.26% year to date.

Timber REITs are attractive for sustainability-minded investors because timber is a renewable resource, and many REITs follow sustainable forestry practices.

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Still, timberland comes with risks. Prices can swing with housing markets, and wildfires or new regulations can damage profits.

For those interested in exchange-traded funds, there are just two timber-focused options: the Guggenheim MSCI Timber ETF (NASDAQ:CUT) and the iShares S&P Global Timber & Forestry Index ETF (NASDAQ:WOOD). But with only three timber REITs in the market, these ETFs include other lumber-related businesses like paper production.

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This article Forests Might Be The Hottest Asset Class You're Not Watching. They Pay A Return, Hedge Inflation And Provide Planet-Friendly Optics originally appeared on Benzinga.com

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