Wood products are also used in things like paper manufacturing, creating pellets for energy, and much more. These tend to be less cyclical than construction, and indeed, the companies in our list below are more heavily levered to these less cyclical uses of lumber, which helps them generate the cash to pay and raise their dividends. Lumber demand is impacted by the strength of the economy, which drives construction activity. But lumber is also subject to availability of certain types of wood, environmental conditions such as fungi or diseases that can impact crop availability, and of course, inflation.
As with any commodity, if inflation expectations rise, the prices of commodities tend to rise in sympathy. That can lead to big swings in lumber pricing, which impacts profitability for the companies that rely upon it for revenue and earnings in one way or another. Even considering these factors, we think that given the right choices for which components to invest in, lumber can be a great place for dividends and growth. Three lumber stocks to consider for dividends are: WestRock (NYSE:WRK), International Paper (NYSE:IP) and Amcor (NYSE:AMCR).
Source: Investor Place
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