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5 Stocks to Watch as Lumber Prices Fall

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Lumber prices are falling to their pre-pandemic lows. Let us look at five lumber stocks with reasonable upside potential and healthy dividend payments.

Now that lumber prices are showing signs of easing, let us look at five lumber stocks that could prove to be beneficial to your portfolio. UFP Industries (NASDAQ:UFP), West Fraser Timber Co. (NYSE:WFG) (TSE:WFG), Louisiana-Pacific Corporation (NYSE:LPX), Resolute Forest Products (NYSE:RFP) (TSE:RFP), and Weyerhaeuser (NYSE:WY) are five companies that have reasonable upside potential and pay regular dividends.

Lumber prices have fallen to their pre-COVID-19 levels recently, fueled by the rising interest rate scenario, which is dragging down construction. Notably, Lumber futures are trading nearly 70% below their March highs and significantly below the year-ago period levels. Specifically, two-by-four prices have declined to prices hovering near the pre-pandemic levels.

The COVID-19 pandemic triggered a huge demand for home refurbishing as well as bolstered demand for suburban homes. During that period, lumber prices had surged to about triple their pre-pandemic levels, signaling an incoming inflationary environment. Also, supply chain snarls and the Russia-Ukraine war have propelled the cost of commodities this year.

UFP Industries (NASDAQ:UFP)

Michigan-based UFP Industries supplies lumber to the manufactured housing industry in three segments; Retail, Construction, and Industrial. The company has operations in North America as well as internationally. Year to date, UFPI stock has lost 23.5%.

Notably, UFP Industries stock pays a regular quarterly common dividend of $0.25 per share, implying a current dividend yield of 1.29%.

What is UFPI’s Price Target?

With three unanimous Buys, UFPI stock has a Strong Buy consensus rating. The average UFP Industries price target of $105 implies an impressive 52.8% upside potential to current levels.

West Fraser Timber Co. (NYSE:WFG) (TSE:WFG)

Vancouver, Canada-based West Fraser Timber produces lumber, wood chips, plywood, pulp, and newsprint. WFG stock has lost nearly 25% year to date. Notably, WFG pays a regular quarterly common dividend of $0.28 per share, reflecting a current dividend yield of 1.34%.

Is WFG a Buy or Sell?

On TipRanks, West Fraser Timber stock commands a Strong Buy consensus rating based on four Buys. The average West Fraser Timber price forecast of $108.92 implies a whopping 55.5% upside potential to current levels.

Louisiana-Pacific Corporation (NYSE:LPX)

Nashville, Tennessee-based Louisiana-Pacific is an American building materials manufacturer offering oriented strand board (OSB) panels and engineered wood products. LPX stock has lost 36.3% so far this year.

The Louisiana-Pacific stock also pays a regular quarterly common dividend of $0.22 per share, representing a current dividend yield of 1.69%.

Is LPX Stock a Buy?

On TipRanks, LPX stock has a Moderate Buy consensus rating. This is based on three Buys, one Hold, and one Sell. The average Louisiana-Pacific price target of $69.20 implies 40.6% upside potential to current levels.

Resolute Forest Products (NYSE:RFP) (TSE:RFP)

Resolute Forest Products owns and operates pulp & paper mills, and wood products facilities located in the United States, Canada, and South Korea. The Montreal, Canada-based company also produces lumber and other wood products for the residential construction and home-renovation markets.

Is RFP Stock a Buy, Sell, or Hold?

RFP stock has a Moderate Buy consensus rating on TipRanks. This is based on one Buy versus two Holds. The average Resolute Forest Products price target of $22.17 implies 10.7% upside potential to current levels, despite gaining a whopping 36.8% so far this year.

Weyerhaeuser (NYSE:WY)

Weyerhaeuser is one of the world’s largest owners of timberland. The company produces forest products, including wood products. WY stock has lost 27.9% so far this year.

Interestingly, WY boasts a current dividend yield of 2.41% and pays a regular quarterly common dividend of $0.18 per share.

Is Weyerhaeuser a Buy?

Weyerhaeuser stock has a Moderate Buy consensus rating on TipRanks. This is based on four Buys and three Holds. The average Weyerhaeuser price forecast of $41.20 implies 48.2% upside potential to current levels.

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