Timber prices could be vulnerable to a decline of as much as 50% in coming years. That likely would sting a group of real-estate investment trusts focused on timber, including Plum Creek Timber (PCL) and Potlatch (PCH), as well as Weyerhaeuser (WY), the forest-products company whose most valuable asset is two million acres of prime forest in the Pacific Northwest. Plum Creek, whose shares are flat this year, at 34, is expected to generate most of its 2009 profits from land sales, prompting analysts at Off Wall Street Consulting to write in a recent report that the company "increasingly looks like a self-liquidating entity rather than an ongoing business concern."

Plum Creek currently pays a dividend of $1.68 a share, and Potlatch, $2.04. Both dividends could be vulnerable because they're not generated from operations. Rayonier (RYN), another timber REIT, is in better shape because it has a more diversified business mix.

Plum Creek currently pays a dividend of $1.68 a share, and Potlatch, $2.04. Both dividends could be vulnerable because they're not generated from operations. Rayonier (RYN), another timber REIT, is in better shape because it has a more diversified business mix.

Credit Suisse analyst Chip Dillon downgraded Weyerhaeuser last week to Underperform from Neutral, citing its ongoing losses, a low dividend yield of less than 1% and potential tax and other hurdles if it tries to convert into a tax-advantaged REIT in the next two years. Weyerhaeuser, whose shares have moved up to 37 from 28 amid a rally in commodity stocks, is expected to lose about $2 a share this year. Dillon pegs "peak earnings" at about $4.45 a share in 2013

In the past decade, timber has migrated from the hands of long-time corporate holders such as International Paper (IP) and Boise Cascade to TIMOs, as forest-products companies sought to rid themselves of low-return assets, bolster their balance sheets and showcase hidden assets. Forest-products stocks generally have been terrible performers in the stock market for two decades. International Paper has rallied to 19 from 4 but remains below where it traded in 1989. Despite its impressive land holdings, Weyerhaeuser, at 37, is only slightly higher than it was 20 years ago.