Why take a chance on a real estate investment trust (REIT) that slashed its dividend by 39% in February? Because not all dividend cuts are necessarily bad, says J. Jeffrey Auxier, manager of Auxier Focus fund, which owns shares of Plum Creek Timber (PCL).

Auxier's strategy is to monitor 200 midsize-to-large companies that dominate their industries and then wait for a misstep that causes their stocks to tumble. "I look for great businesses with temporary problems," he says.

Plum Creek, which owns nearly eight million acres of timberland, is one of those stand-out companies facing a setback. Canadian timber inundated the market last year. Consequently, if Plum Creek had cut and sold enough trees to cover its dividend, it would have had to do so at a depressed price. Holding off, says Auxier, "was a smart move."

Even with the reduced dividend, the stock still yields 6.5% annually, or $1.50 per share. It sells for 16 times the 2004 consensus earnings estimate of $1.36 per share.

-- Courtney McGrath

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