Forgot your password?
New user?
Document Actions
Pinchot Retirement Plan - Frequently Asked Questions
Since posting a couple of blog articles on the so-called Pinchot Retirement Plan that is touted by a newsletter publisher, TGI has had a few questions. This FAQ intends to answer them.
- Q: What is a Pinchot Plan?
- A: It seems to be a strategy of investing in various timber companies, named in the articles that allegedly pay big dividends and reinvesting those dividends.
- Q: Is it an official retirement plan like an IRA or 401(k)?
- A: Not to my knowledge, it isn't. But you can create one yourself in an IRA or 401(k). See below.
- Q: Are the dividends paid by "Pinchot Plan companies" really as big as the advert says?
- A: No, the advert neglects to mention that a large part of the dividends it claims you could make were special dividends paid only when a Timber company converted to a REIT.
- Q: How is it that the dividends paid by timber REITs are so generous compared with say, Pfizer's dividend?
- A: By virtue of being a REIT (Real Estate Investment Trust), the majority of profits need to be paid to shareholders. Note, not all timber companies are REITs.
- Q: Where do these profits come from?
- A: By selling timber, lumber, land, etc.
- Q: But if they sell all the land they own, they won't be able to pay a dividend anymore, right?
- A: It's possible, yes. However, in practice they will usually invest some of the proceeds in more land that may appreciate in value.
- Q: Will Pinchot Plan companies continue to pay a dividend?
- A: They may or they may not. The dividend may be patchy and there may be periods when it is not paid or substantially reduced.
- Q: Is timber a safe investment?
- A: Maybe, but in all probability no safer than any other investment. Likely to be safer than many stocks though. Timber is a finite, but renewable resource which has demand, and the land on which it grows is a finite non-renewable resource that generally appreciates in value.
- Q: Can you send me more information on the Pinchot Plan?
- A: No, The Graham Investor does not have any more information other than what is posted in the articles entitled "What the Heck Is A Pinchot Plan" and "How To Start Your Own Pinchot Retirement Plan" and the FAQ here.
- Q: Do you recommend investing in timber companies?
- A: I don't recommend companies to invest in. I am not an investment advisor and therefore not qualified to give advice. These articles are intended to provoke thought and discussion and help you with making your own decisions, not make them for you.
- Q: Isn't it unethical to be chopping down trees before they are fully grown?
- A: I don't think that's what Sustainable Forestry is about. I think your concerns might be better directed against companies that are destroying large swathes of Rainforest around the world.
- Q: Will Brookfield Asset Management, the firm taking over Longview maintain Longview's existence as a REIT?
- A: I suspect only Brookfield could answer that question right now.
- Q: I want to invest in the Pinchot Plan companies anyway. How do I start?
- A: REITs are bought and sold through a broker like stocks. I generally use Sharebuilder for dividend stocks because they have automatic plans and reinvest the dividends for free. For most people it might be more beneficial and less hassle to do this in a tax-deferred or tax-advantaged account.
- Q: Should I sign up for the newsletter mentioned in the advert that plugs the Pinchot Plan?
- A: I don't know. That's entirely up to you. I never did myself. I was just curious just like you and decided to use my own initiative to find out what the "Pinchot Plan companies" were and the truth about their dividends rather than fall for the hype.
- Q: What has timber got to do with Ben Graham anyway?
- A: Not much, other than the philosophy of trying to buy undervalued assets. The excellent analytical comment by Timber_investor below my article "What The Heck is a Pinchot Plan" is well worth reading and says it better than I could.
Real Estate Invesment Trust