Rayonier Slides on Downgrade

JACKSONVILLE, Fla. ( TheStreet) -- Rayonier ( RYN), a real estate investment trust , bid lower on Tuesday following some unfavorable broker action.

Analysts from Credit Suisse ( CS) cut their rating on Rayonier to underperform, from neutral, citing valuation.

The analysts said Rayonier is a well-run company that has managed its business well but is now overvalued as speculative investors ran up rayon prices.

Rayonier shares fell 1.6% to $56.46 in afternoon trading amid heavier-than-normal trading. Nearly 1 million shares were in play with over an hour left in the session compared with their average daily trading volume of 708,000 shares.

Rayonier was recently listed on TheStreet's list of 10 Top Buy-Rated Real Estate Stocks for 2011 .

The list was based on equity research firm Keefe, Bruyette & Woods' best buy-rated REIT picks for this year.

KBW set a price target of $57 for Jacksonville, Fla.-based Rayonier, an international forest products company which is engaged in activities associated with timberland management, the sale and entitlement of real estate, and the production and sale of high value specialty cellulose fibers and fluff pulp.

Rayonier has a market cap of around $4.5 billion, and a current dividend yield of around 3.8%.

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Timber REITs outperformed both the overall equity REIT market and the S&P 500 in 2010, though Rayonier outpaced the group with a total return of 29.8%. Timber peer Potlatch ( PCH) returned 6.7% while Plum Creek ( PCL) returned just 2.3%.

KBW noted that timber REITs limited harvest volumes as much as 30% below sustainable outputs in 2010 as a means of maximizing trees rather than selling into a depressed market. As such, the research firm expects 25% growth in EBITDA for the year despite profits remaining 50% below peak levels in 2005 and 2006.

KBW's Sheila McGrath said November housing starts -- which ticked up a better-than-expected 3.9% to a seasonally adjusted annual rate of 555,000 yet remain 5.8% below year-earlier rates -- need to reach 1 million "before we see a meaningful increase in sawlog pricing."

With the supply of unsold new-home inventories near 10-months , she doesn't expect a housing recovery until 2012 , meaning 2011 estimates are still too high and are likely to decline, and that dividend payments are likely to remain under pressure.

In October Rayonier increased its quarterly cash dividend by 8% to 54 cents per share . The higher dividend will be paid Dec. 31 to shareholders of record on Dec. 10.

In early December analysts from Stifel Nicolaus initiated coverage of the forestry products and timberland REIT with a buy rating and $60 price target. Wells Fargo initiated coverage of Rayonier in the week prior, also giving it a buy rating and $60 price target.

On Jan. 4, Rayonier director Paul Kirk sold 1,000 company shares at $55.62 per share for $55,620.

-- Written by Miriam Marcus Reimer in New York.

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