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Timber REITs: How Does Rayonier’s Stock Split Affect Shareholders?

On July 25, 2011, Rayonier (RYN) announced that its board of directors approved a three-for-two stock split. On August 24, 2011, the company issued one-half additional share for each share held to shareholders of record as of August 10, 2011. As a result, RYN’s share price adjusted from $60.78 on close of August 24, 2011 to $40.52 on open of August 25, 2011 to reflect this split.

How does this split affect RYN shareholders? Technically, it doesn’t.  Assuming a shareholder owns 100 shares of RYN pre-split and 150 shares post-split; the total value of these shares remains unchanged, as does RYN’s total market capitalization (see table). Both the size of the pie and the slice of the pie held by a shareholder do not change.

Why split? A stock split often occurs when companies have seen their share price increase to levels that look expensive relative to price levels of other companies in the sector. After the split, shares look more affordable and attractive to small investors, which can boost demand. The increased number of outstanding shares also boosts liquidity.  Year-to-date, RYN has returned 15.38% to investors, while most other timber REITs have shown negative returns. In 2010, RYN’s share price appreciated 31.74%. Post-split, RYN’s share price ($40.40) looks more in-line with its peers, like Plum Creek-PCL ($ 36.34) and Potlatch-PCH ($32.99) as of close of August 26, 2011.

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