Back to top

Analyst Blog

Plum Creek Timber Company Inc. (PCL - Analyst Report) announced a 5% hike in its quarterly cash dividend rate, based on its bullish expectations of persistent growth of long-term, sustainable cash flow.

The company will now pay a dividend of 44 cents per share, 2 cents above the prior-quarter dividend of 42 cents per share. The increased dividend will be paid on May 31, 2013 to stockholders of record on May 17.

Plum Creek has established a solid operating platform that helps it generate a decent cash flow. The cash generated by the company’s manufacturing and timber resource businesses escalated by a combined $44 million in 2012. Given the strong fundamentals of these business segments as well as the growth prospects, the company further expects an uptick in cash generated from these businesses in 2013.

Plum Creek also came up with impressive results in first-quarter 2013. The company’s earnings per share reached 35 cents, comfortably surpassing the Zacks Consensus Estimate of 32 cents and well ahead of the year-ago quarter earnings of 18 cents. Net income for the quarter nearly doubled to $56 million from $29 million reported in the prior-year quarter.

The better-than-expected results at this real estate investment trust (REIT) were driven by increasing demand for wood products stemming from a recovery in the residential construction market. The company has registered a decent performance across its segments.

Plum Creek’s deal with Drax and Vulcan Materials Company (VMC - Analyst Report) will augur well for its top line. The company is aiming to increase its non-real estate adjusted EBITDA by $50 million this year. In this regard, it has already reported growth of $12 million in the first quarter.

Therefore, with solid quarterly results and strong fundamentals, the company is well poised to maintain its growth curves and simultaneously benefit the shareholders with steadily rising dividends.

As a matter of fact, solid dividend payouts are arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.

Plum Creek currently has a Zacks Rank #3 (Hold). However, the other two  stocks which are performing better and deserve a look include Louisiana-Pacific Corp. (LPX - Snapshot Report) and Weyerhaeuser Co. (WY - Analyst Report), both carrying a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.