Rayonier (RYN) Sells Timberland, Announces Special Dividend
Rayonier Inc. RYN recently sold 55,000 acres of timberland in Oregon to Manulife Investment Management on behalf of clients for $242 million or roughly $4,400 per acre. The transaction was subject to customary prorations and closing costs.
The move is part of Rayonier’s capital structure realignment plan, through which it aims to dispose of select assets totaling $1 billion over the next 18 months. This will enhance shareholder value by capturing significant disparity between public and private market timberland values and lower the company’s debt.
This timberland real estate investment trust’s (REIT) also intends to bring its net debt to adjusted EBITDA within 3.0X compared with 4.5X targeted earlier. Such efforts will increase capital allocation flexibility and improve CAD per share.
Of the $242 million received, Rayonier utilized $150 million to repay its floating rate debt while $30 million was used to distribute a special dividend of 20 cents per common share to shareholders. The one-time dividend will be paid out on Jan 12, 2024, to shareholders on record as of Dec 29, 2023.
The remaining proceeds will be used for debt reduction and/or other capital allocation purposes in the future.
Per David Nunes, chief executive officer of the company, “We are actively working to bring additional timberland assets to market as we execute on our plan to capture the disparity between public and private timberland values, position our balance sheet for a higher interest rate environment, and return meaningful capital to shareholders.”
Rayonier owns a solid timberland portfolio in some of the most productive timber-growing regions of the U.S. South, the Pacific Northwest and New Zealand. It has emerged as the leading “Pure Play” timber REIT, generating 74% of its EBITDA from timber operations, compared with 23% for the peer group over the last three years.
The lumber production and capacity in the U.S. South have grown substantially over the past few years. This positions Rayonier well to capitalize on the favorable trend, given that 73% of its Southern timberlands are located in the top quartile markets.
Moreover, the timberland REIT’s business has significantly benefited from the recent developments in the field of biogenetics and cloning that have led to faster growth in trees, thus ensuring proper sizes for maximum extraction of wood.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the company’s 2023 earnings per share has been raised 8.8% over the past two months to 37 cents.
Shares of RYN have gained 15.8% in the quarter-to-date period compared with its industry’s upside of 14.6%.
Image Source: Zacks Investment Research
Nonetheless, Rayonier faces competition from various national and local players regarding a number of factors, including quality and price. Also, various substitute products, like non-wood and engineered wood products, are likely to hurt the demand for wood products, weighing on the company’s prospects.
Given a weaker export market demand, the company’s Pacific Northwest Timber segment is likely to remain in distress in the near term and witness a decline in pricing, hurting profitability. For 2023, we estimate a year-over-year decline of 17.5% in the segment’s revenues.
Also, subdued residential construction activity due to a high interest rate environment is concerning. Rayonier may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side.
Stocks to Consider
Some better-ranked stocks from the REIT sector are EastGroup Properties EGP, Stag Industrial STAG and Park Hotels & Resorts PK. While PK sports a Zacks Rank #1 (Strong Buy), EGP and STAG each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 funds from operations (FFO) per share has moved marginally upward in the past two months to $7.70.
The consensus estimate for Stag Industrial’s ongoing year’s FFO per share has increased 1.3% over the past two months to $2.28.
The consensus mark for Park Hotels & Resorts’ current-year FFO per share has moved marginally northward over the past month to $1.99.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Rayonier Inc. (RYN) : Free Stock Analysis Report
Stag Industrial, Inc. (STAG) : Free Stock Analysis Report
EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
