Rayonier Offers 3% Dividend Yield, 20%-Plus One-Year Total Return (RYN)

Rayonier, Inc. (NYSE:RYN) is an unconventional real estate investment trust (REIT) that offers its shareholders a 3% forward yield and a double-digit-percentage asset appreciation for a combined total return of more than 20% over the past year.

The uniqueness of this REIT is that it does not invest in what most people would consider real estate – private homes, multi-tenant residences, office buildings and commercial facilities. Rayonier’s focus is on investing and managing land, timber and timber-derived resources, such as wood pulp, paper, lumber, renewable energy production and other wood products.

The company will pay its next quarterly dividend on March 29, 2018, to all its shareholders of record prior on its March 15, 2018, ex-dividend date.

Rayonier, Inc. (NYSE:RYN)

Currently headquartered in Yulee, Florida, the company’s origins go back to the incorporation of the Rainier Pulp and Paper Company in 1926. Rayonier has been operating as a real estate investment trust since 2004. Unlike most REITs, Rayonier invests in timber and land resources, and operates through three business segments. The Forest Resources segment manages sustainable use of timber resources and production of timber-derived products. Furthermore, the company’s Real Estate segment – Raydient Places + Properties – serves as a real estate agent and broker for the sale of land and rural property listings in the southeastern United States from Florida to Texas.

The company’s Hunting and Recreation segment makes more than 2.3 million acres available for recreational licensing in Alabama, Georgia, Florida, Texas, Oklahoma, Washington and Oregon. Those recreational activities include hunting, camping, hiking and other outdoor activities, such as collecting firewood or mulch. As of December 31, 2017, the company owned, leased or managed almost 2.7 million acres of timberlands located in the United States and New Zealand.

The company’s current $0.25 quarterly dividend distribution yields 3% and is equivalent to a $1.00 annualized payout per share. The company started paying dividends in 1994 and missed annual dividend hikes only three times prior to the company’s only annual dividend cuts in 2014 and 2105. Over the two decades between 1994 and 2013, the company’s annual dividend payout amount increased more than 36-fold by rising at an average growth rate of 19.7% per year.

However, the company cut its dividend over the last two quarters of 2014 and has been paying the same $0.25 amount for the past 14 consecutive quarters – since the last quarter of 2014. While the annual dividend payout has not been rising lately, the company managed to bring its 154% average dividend payout ratio over the past five years down to a more manageable 86%. While an 86% dividend payout ratio would be unsustainable over a long horizon for a company, REITs are required to distribute almost all of their earnings as dividends to retain their advantageous tax status. Therefore, Rayonier’s current dividend payout ratio is sustainable over the long run. While there are no indications that the REIT will hike its earnings in 2018, it might be able to do so at some point in 2019 or beyond.

In the meantime, investors can reap the benefits of the ascending share price, which, in conjunction with the moderate dividend income, provides double-digit percentage annual total returns. Rayonier’s share price has been trending up and rose almost 80% over the past two years with only minor volatility. Entering the trailing 12 months (TTM), the share price dipped almost 5% between February 28, 2017, and May 4, 2017, to hit its 52-week low of $27.27. After the May 2017 bottom, the share price rose more than 23% without any major corrections and reached $33.60 by January 26, 2018.

After a 7% pullback during the market sell-off in the first week of February 2018, the share price returned to its uptrend, recovered all its losses in fewer than 10 days and continued to ascend towards its 52-week high of $34.54 by February 26, 2018. After the peak, the share price declined 1.6% and closed on February 28, 2018, at $33.99, which was 18.7% higher than it was one year earlier and 24.6% higher than the 52-week low from May 2017.

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