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Here's Why You Should Add Potlatch (PCH) to Your Portfolio

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Shares of a timber Real Estate Investment Trust (REIT), Potlatch Corporation (PCH - Free Report) , have been riding high of late. The company is poised to gain through the remainder of 2017 as lumber supply/demand fundamentals are looking favorable owing to solid housing activity and supply constraints.

Let us delve into other factors which make this Zacks Rank #1 (Strong Buy) stock a lucrative pick. You can see the complete list of today’s Zacks #1 Rank stocks here.

Share Price Performance

The company’s shares have yielded a return of 24% in the last 12 months in contrast to the industry’s rise of 6.5%.



Also, Zacks Wood Industry finds a place in the top 21% of the Zacks Industry Rank. A good industry rank supports growth. In fact, on a year-to-date basis, the industry has outperformed the broader market (S&P 500), as you can see below.



Solid Growth Prospects

Nothing is more important than earnings growth.

On this front, Potlatch has reported a historical (3-5 year) EPS growth rate of 111.6% compared with the industry’s average of 28.2%. Moreover, the company is aiming to grow at a rate of 103.9%, significantly higher than the industry's average of 28%.

Meanwhile, the company’s sales are expected to increase 11.9% in the current year compared with the industry’s average growth of just 3.2%. Hence, Potlatch makes for a great pick in terms of growth investment.

Estimates on the Upswing

We note that earnings estimates for Potlatch have exhibited an uptrend, reflecting optimism in the stock’s prospects. The Zacks Consensus Estimate for the company’s current-year earnings has moved up 14.5%, reflecting four upward revisions over the last 60 days. Also,  estimates for 2018 have climbed 9.3% over the same time frame, depicting three positive revisions.

Return on Equity

Potlatch’s trailing 12-month return on equity (ROE) supports growth potential. ROE in the trailing 12 months is 30.1%, while the industry gained 10.6%. This reflects the company’s efficient usage of shareholders’ funds.

High Dividend Yield

Given its decent cash generating capacities, Potlatch currently has a solid dividend yield of 3.15%, considering last day’s closing price of $48.10 per share. The company’s five-year historical dividend growth rate is 4.9%.

Other Stocks to Consider

Other top-ranked stocks worth considering in the same space are M/I Homes, Inc. (MHO - Free Report) , Rayonier Inc. (RYN - Free Report) and Trex Company, Inc. (TREX - Free Report) , each carrying a Zacks Rank #2 (Buy).

M/I Homes’ earnings are expected to grow 37.1% this year, higher than the industry’s average of 18%.

Rayonier beat estimates in three of the past four quarters, with the average being 59.94%.

Full-year 2017 earnings for Trex are expected to increase 17.7%.

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