Timberland as an investment class has some great things going for it. Inflation protection. Renewable-ness. Harvard University's smart managers have over 10% of its endowment in Timberland. Timberland is one of Jeremy Grantham's favorite investment classes. A big minus though is that timber investments typically require a large ($250,000 or so) investment and a long lockup period - making them out of reach for the little guy. However there are some ways for small investor to get meaningful exposure to this asset class.

Plum Creek Timber (PCL) is a traded on the NYSE. It owns a ton of land, and pays a decent dividend. My understanding is that its dividend is taxed as capital gains - a quirk of how the tax system treats timberland.

I did a quick back of the envelope calculation, dividing PCLs enterprise value by its total acreage - at current prices buying PCL is like buying timberland for little under $1000/acre.

Another more or less pure timber play is a much smaller Canadian company called Timberwest. This trades on the TSX (you can buy it there or as an OTC pink sheet). The yield is currently around 6.75%. This security is sold as a 'stapled unit' - e.g. part stock, part debt so the dividend is not treated as 100% qualified dividend. For this reason this is a good stock to hold in a deferred account. Timberwest is a current holding of value guru Marty Whitman's Third Avenue funds.

Both of these stocks are an easy and pure way to buy timberland on a fractional basis. I don't see either of them as a compelling buy right now. As the Fed continues tightening (and risk free T-bills get to yielding 4% or better), and as the housing boom (and its attendent demand for lumber) implodes both these nice stocks may get a bit cheaper.

But it's good to know they're out there.

-fg

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