Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

July 15, 2010 - Plum Creek Timber (PCL-NYSE) is a real estate investment trust (REIT). The trust owns and manages timberlands in the United States. It sells lumber products, plywood, medium density fiberboard, and related by-products, such as wood chips. The trust also focuses on mineral extraction and natural gas production, communication, and transportation. Plum Creek Timber Company was founded in 1989 and is based in Seattle, Washington.

Revenues followed a little different path. They went from $1.675 billion in 2007 to $1.614 billion to $1.294 billion last year. This year, 11 analysts have a consensus estimate for another, lower year to $1.24 billion but then see better results next year at $1.31 billion. While sales slowed, the company cut costs and became more efficient.

Plum Creek needs a better housing market to fire on all cylinders again, especially new housing. While consumer demand has started to show some life as homeowners build decks or re-roof their homes, it's the new construction business that creates the most demand for Plum's lumber. If you believe housing is about to recover, then Plum will appeal as an income investment and a growth stock.

Management sold some timberland over the last few years as well as downsized its manufacturing business and lowered head count. It also diversified its revenue base by starting real estate development and renewable energy resources. It continues to add more timberland strategically as it looks to improve its geographic placement.

With the sale of assets comes cash. The company has been using it two ways: paying down debt (which is still 51% of capital) and buying back stock. There's currently $304 million in cash. Total debt is $2.73 billion. Current ratio is 3.05.

The stock price hit an all-time high of $60 a share in late 2008, then proceeded to look for lower prices until it stopped in early 2009 at $22.90. Since then it has shown some signs of life and moved as high as $43.80. It's off almost 20% from there now. The catalyst for any real change in the stock will be the housing market. If it shows new strength, expect this stock to follow.

More numbers: Market Cap is $6.0 billion. Trailing P/E is 36 but Forward P/E is 23. Price to sales ratio is 5.27 and Price to book is 4.04. Book value is $9.12. In the last 12 months Operating margin was 20.42% and Profit margin was 14.55%. Return on assets was 3.22% and Return on equity was 10.13%. Beta is 1.15. Shares outstanding are 162.97 million with a Float of 162 million. Institutions own 72.4% of the Float. Insiders own .25% of the stock. The dividend is $1.68 a year for a yield of 4.7%.

Income investors should like this story if they are leaning toward a housing recovery. While margins have been improving in a down economy, Plum should post even better ones in a good economy.

- Company Web site: www.plumcreek.com

- Ted Allrich