With forestry stocks in general settling down of late, investors looking for opportunities in this sector really don’t have to look too hard right now.
That said, one Canadian timber producer has been hit particularly hard in recent months due to a strike which lasted approximately six months, hampering the company’s stock more than it likely would have, given current industry fundamentals.
Investors in Vancouver Island-based Western Forest Products (TSX:WEF) had experienced the pain of a prolonged strike, as evidenced in the company’s stock price, with the share price of WEP down approximately 35% year over year, at the time of writing.
This performance really isn’t that bad when you consider the forestry sector overall has declined from its peak in 2019, amid concerns that slower housing starts domestically, but particularly in the U.S., would mean less softwood lumber shipped to our Southern neighbor.
With this headwind now pushed aside, the question many investors are asking right now is whether now is the right time to jump in.
I would say the timber sector really has a lot of downside room at the present time, and I’ve been wary of the health of various macro drivers (which have actually held up quite well in recent years), making an investment in Western Forest Products, or any lumber company for that matter, a risky proposition for me.
While some investors, like myself, may view the lumber industry as too cyclical overall, WEP’s dividend yield of 8% really is the attractive factor for income investors today.
There is some real risk to this dividend, but the company’s management team has indicated it may elect to continue to pay out this dividend moving forward, despite an expected EBITDA loss for this year. This stock, and its dividend, remains too risky for my blood.
Invest wisely, my friends.
