Renewable Wealth Model Investment Portfolio: Rayonier

Today we launch our Renewable Wealth model portfolio with our first pick: Rayonier . A timber company like Rayonier may be a controversial choice among some of our readers. If this is true for you, then you might want to have a look at our take on green investing to get an idea about our basic sustainable investment philosophy.

Why an Investment in Timber is a Green Investment

Timber is the ultimate renewable and sustainable resource. Most modern timber companies focus on cultivated timber, as opposed to harvesting old-growth trees, and accordingly their interests lie in preserving timberland. In our view, the best way to protect forests is to ensure that they have ongoing economic value.

Wood is renewable, 100% biodegradable, and its production and harvest help to sink carbon from the atmosphere back into the earth. Products made of wood are thus greener by nature than most alternatives, like metal or plastic. Furthermore, cellulosic ethanol produced by trees and tree-seed biodiesel both have great prospects to help ween us off of fossil fuels. Cellulosic ethanol in particular makes much more sense than corn ethanol, and if the technology takes off, timberland companies stand to profit handsomely.

A Rock-Solid Foundation for your Green Investment Portfolio

Timber as an asset class has outperformed the stock market for as long as records have been kept. Rayonier in particular has a long record of steady profits, and wise buying and selling decisions for its timberland holdings. It presently offers a nice dividend yield of over 4.5%

A Temporary Slowdown

Most timber companies are forecasting slower earnings in 2008, primarily due to the housing slump. RYN is no exception. That’s good news for investors - it gives us a great opportunity to get in at a good price. Rayonier closed at $43.63 today - down from its 52-week high of $49.55.

The beautiful thing about the timber business it that in slow years like 2008, companies like Rayonier can simply slow down their harvest of trees. This may cut down on current cash revenues, but the trees will continue to grow in the meantime, and will be worth even more when demand picks up again, as it inevitably will (China, in particular, is in desperate need of lumber, and its demand will only continue to grow). No matter what else is going on in the economy, when you own timber, your asset base just continues to grow every year.

Don’t expect any fireworks from Rayonier now or in the future. But do expect steady double-digit growth for many years to come.

Stay Tuned For More

Over the next few days we will be adding more picks to form a solid platform for our green investment model portfolio.

Until Next time!