Rayonier falls -- Timberrrr! (RYN)
Just kidding.
Though you couldn't blame a soft-headed guy for looking at Rayonier's stock
price today and wondering why on earth it fell more than 30%. After all, this is a great stock with an excellent dividend and this company owns mills and thousands and thousands of acres of forest -- that stuff is getting more valuable, not less.
In case you didn't notice, the key thing to note is that Rayonier (RYN -- get free real time quote from ADVFN
) split today.
Which brings me to the meat of my Rayonier rant:
Before I get too far, let me reiterate: I really like this business (just as much as when I did my initial writeup here -- or even more, now that they've settled their New Zealand property deal), and I'm not selling. I just think the split is silly.
Why on earth did Rayonier put the energy and money into splitting their stock? It was trading at about $53, and today it's down around $35. What corporate or other purpose could that possibly serve? I know, it's not a big deal -- but this transaction is not free, either ... I'd rather see my company focus on business than micromanage the stock price like this.
And at the same time, Deutsche Securities coincidentally decides to initiate coverage with a buy?
How on earth does doing a confusing and pointless 3-for-2 exchange make a company more valuable to the extent that you want to begin covering it?
Prez and CEO Lee Nutter's quote was that "The stock split recognizes the appreciation in value of Rayonier's common shares since our last split in June 2003 and should further improve liquidity and trading volume." (AP story here). Since when do you have to "recognize" an increased share price by bumping the price back down to where it began?
And I wasn't aware that Rayonier had any liquidity or trading volume problems. This isn't a stock that it's difficult to trade -- if you place a reasonable order, you'll get it filled pronto. 250,000 shares change hands every day, which is plenty for this $2 billion company that's in a not-particularly-volatile business (if a tree takes at least 20 years to grow, do you really think it'll help you to trade in and out of this company three times a day?).
Is a slight increase in daily trading volume -- let me go out on a limb here and suggest that the increase in volume will exactly track with the decrease in share price -- going to help anyone?
No.
If anything, for those few people who remain mired in brokerage accounts which require you to pay per number of shares, this will hurt -- you'll be trading more shares for the same position in the company, so you might pay a little more. Helps the brokerage a bit, I suppose, but why should management care?
I assume that this is just one of the tried-and-true ways to boost the share price. There are still plenty of traders who believe that the price of a stock really matters -- haven't you been paying attention? Berkshire Hathaway and Google, among many others, should have disabused any long-term investor of the value of a stock split. As long as you're not treading water below $5 or in the stratosphere at several hundred dollars or more, why would it make a difference?
What matters is the value of the company, and what percentage of the company you're buying (and how much you're willing to invest in the company). For that, it shouldnt' matter at all what the share price is. It doesn't matter if I'm buying 2 shares of BRK.B or 20 shares of GOOG or 200 shares of SUNW -- it's the same amount of money (okay, roughly ... I didn't do the math).
Now, I do see some point to this when you get to BRK and GOOG land -- it's true that small investors might have trouble buying a single share of BRK, even the $3,000 B shares. And for those enrolled in plans like Sharebuilder where you add just a hundred dollars a month or some such thing, it's hard to include GOOG and it's $300 price.
But do you really think Rayonier's CEO particularly cares about those people? I don't.
And even if you accept the argument of the market that you need to do a split now and then to keep your share price in line with what people prefer to pay for stocks, there is certainly no point in splitting your shares when they have just barely squeaked above $50. And splitting 3 for 2? Why make this confusing for everyone? If you need to split, wait until you're well above $100 and split in half.
OK, rant over.
What mostly bothers me is that this announcement of a split overshadowed Rayonier's much more significant announcement made on the same day -- they have increased their dividend by almost 14%. That is big news, and, to be fair, I expect that news was the prime driver behind the stocks 4% tick up back in mid-September.
Now, RYN is down again a bit from those heady days when they announced their stock split and increased dividend last month -- not a big deal. Keep an eye out for the property sales they're making along the SE Georgia/NE Florida coast -- that's where people want to live, and Rayonier owns the land and is willing to sell at the right price. And watch that dividend -- trees take a long time to grow, and tree products are as valuable and irreplaceable as ever, I expect this little income producer will continue to kick out nice dividends, even though I don't expect many more years like this of 20% capital gains like this on top of that.
So buy up some more Rayonier ... I might, one of these days. But not because it's at $35 instead of $53 -- that matters not a whit.
Though you couldn't blame a soft-headed guy for looking at Rayonier's stock
In case you didn't notice, the key thing to note is that Rayonier (RYN -- get free real time quote from ADVFN
Which brings me to the meat of my Rayonier rant:
Before I get too far, let me reiterate: I really like this business (just as much as when I did my initial writeup here -- or even more, now that they've settled their New Zealand property deal), and I'm not selling. I just think the split is silly.
Why on earth did Rayonier put the energy and money into splitting their stock? It was trading at about $53, and today it's down around $35. What corporate or other purpose could that possibly serve? I know, it's not a big deal -- but this transaction is not free, either ... I'd rather see my company focus on business than micromanage the stock price like this.
And at the same time, Deutsche Securities coincidentally decides to initiate coverage with a buy?
How on earth does doing a confusing and pointless 3-for-2 exchange make a company more valuable to the extent that you want to begin covering it?
Prez and CEO Lee Nutter's quote was that "The stock split recognizes the appreciation in value of Rayonier's common shares since our last split in June 2003 and should further improve liquidity and trading volume." (AP story here). Since when do you have to "recognize" an increased share price by bumping the price back down to where it began?
And I wasn't aware that Rayonier had any liquidity or trading volume problems. This isn't a stock that it's difficult to trade -- if you place a reasonable order, you'll get it filled pronto. 250,000 shares change hands every day, which is plenty for this $2 billion company that's in a not-particularly-volatile business (if a tree takes at least 20 years to grow, do you really think it'll help you to trade in and out of this company three times a day?).
Is a slight increase in daily trading volume -- let me go out on a limb here and suggest that the increase in volume will exactly track with the decrease in share price -- going to help anyone?
No.
If anything, for those few people who remain mired in brokerage accounts which require you to pay per number of shares, this will hurt -- you'll be trading more shares for the same position in the company, so you might pay a little more. Helps the brokerage a bit, I suppose, but why should management care?
I assume that this is just one of the tried-and-true ways to boost the share price. There are still plenty of traders who believe that the price of a stock really matters -- haven't you been paying attention? Berkshire Hathaway and Google, among many others, should have disabused any long-term investor of the value of a stock split. As long as you're not treading water below $5 or in the stratosphere at several hundred dollars or more, why would it make a difference?
What matters is the value of the company, and what percentage of the company you're buying (and how much you're willing to invest in the company). For that, it shouldnt' matter at all what the share price is. It doesn't matter if I'm buying 2 shares of BRK.B or 20 shares of GOOG or 200 shares of SUNW -- it's the same amount of money (okay, roughly ... I didn't do the math).
Now, I do see some point to this when you get to BRK and GOOG land -- it's true that small investors might have trouble buying a single share of BRK, even the $3,000 B shares. And for those enrolled in plans like Sharebuilder where you add just a hundred dollars a month or some such thing, it's hard to include GOOG and it's $300 price.
But do you really think Rayonier's CEO particularly cares about those people? I don't.
And even if you accept the argument of the market that you need to do a split now and then to keep your share price in line with what people prefer to pay for stocks, there is certainly no point in splitting your shares when they have just barely squeaked above $50. And splitting 3 for 2? Why make this confusing for everyone? If you need to split, wait until you're well above $100 and split in half.
OK, rant over.
What mostly bothers me is that this announcement of a split overshadowed Rayonier's much more significant announcement made on the same day -- they have increased their dividend by almost 14%. That is big news, and, to be fair, I expect that news was the prime driver behind the stocks 4% tick up back in mid-September.
Now, RYN is down again a bit from those heady days when they announced their stock split and increased dividend last month -- not a big deal. Keep an eye out for the property sales they're making along the SE Georgia/NE Florida coast -- that's where people want to live, and Rayonier owns the land and is willing to sell at the right price. And watch that dividend -- trees take a long time to grow, and tree products are as valuable and irreplaceable as ever, I expect this little income producer will continue to kick out nice dividends, even though I don't expect many more years like this of 20% capital gains like this on top of that.
So buy up some more Rayonier ... I might, one of these days. But not because it's at $35 instead of $53 -- that matters not a whit.
Labels: RYN
This article posted by One Guy @ 10/19/2005 02:31:00 PM 0 comments
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