Weyerhaeuser Co. (WY) on September 1, 2010, will be paying its special dividend worth $5.6 billion, with cash payments restricted to 10% or $560 million. Shareholders of record as on July 22 were given options for stock or cash payments.
Of the eligible shareholders, roughly 66% holding 138.9 million shares opted for cash payments and will be receiving 15% or $4.03 of their special dividend in cash and the rest in stock. Remaining 34% shareholders holding 72.7 million shares were elected for stock payment. Number of shares to be received will be dependent on the shares average price on August 24, 25 and 26.
The special dividend distribution, an important step in the company’s plan to convert to a real estate investment trust (REIT), is inclusive of the regular quarterly dividend payment of approximately $11 million.
The company’s conversion into an REIT will reduce its tax liabilities due to lower taxes on REIT qualifying timberlands income and increased competitiveness in managing its timber portfolio. Reversal of certain tax liabilities will benefit third quarter 2010 financial results by $1 billion.
On the flip side, the stock option will be treated as share issuance for the period after special distribution and will result in an increase in shares outstanding. The increased shares will result in lower EPS in the quarters ahead.
Weyerhaeuser is one of the leading U.S. forest product companies, primarily engaged in growing and harvesting timber. The company manufactures, distributes, and sells forest products; and is also involved in real estate development and construction.
Weyerhaeuser’s quarterly dividend rate is $0.05 per share. At the end of the first quarter of 2010, the company paid roughly $11 million in dividends. Cash and cash equivalents at the end of the quarter were $2.1 billion and net cash from operating activities was roughly $190 million.
Weyerhaeuser faces stiff competition from Canfor Corporation, International Paper Co. (IP), and Louisiana-Pacific Corp. (LPX). Also, the industry’s sensitiveness to macroeconomic conditions remains a cause of concern. We are currently maintaining a Neutral recommendation on Weyerhaeuser, which is supported by Zacks #3 Rank.
INTL PAPER (IP): Free Stock Analysis Report
LOUISIANA PAC (LPX): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
Zacks Investment Research
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