Weyerhaeuser: The Major REIT With, Possibly, The Least Amount Of Debt

Relative to the amount of shareholder equity, Weyerhaeuser Co. WY may be among the major real estate investment trusts (REIT) with the least amount of debt. This consideration may be of greater importance as the Federal Reserve takes further actions to increase interest rates. Those REITs with significant debt loads are likely to be more adversely affected by the increases.

That’s why Weyerhaeuser stands out as REIT prices have mostly collapsed: If you were a bargain hunter, a “least amount of debt” factor might be of interest. Buyers who search for those types of balance sheet items may find Weyerhaeuser showing up near the top of the list.

Here’s what the REIT looks like at Benzinga.com if you search for Weyerhaeuser and click on statistics.

Balance Sheet

The main thing here is how much the total assets exceed the total liabilities: It’s $17.6 billion to $6.8 billion. That ratio of 2.5 is good in any sector and particularly in the real estate investment trust group of majors. Trading about twice its book value is not bad either, compared to earlier this year when investors were paying three times book. 

Valuation Measures

The main thing here is the price-earnings (P/E) ratio of 8.51, definitely a low reading relative to the market as a whole. For example, the P/E of the Standard & Poor’s 500 now sits at 18.07 and the Shiller P/E ratio — the cyclically adjusted PE ratio (CAPE) — is 26.78. Weyerhaeuser begins to look like a value stock of some kind.

This year’s funds from operations (FFO) is up by 225% and the past five-year FFO growth rate is 44.9%. The REIT’s price to free cash flow seems decent at 18.17. Weyerhaeuser is paying a dividend yield of 2.44%, not as outrageously high as some REITs but this relatively lower level makes it somewhat less sensitive to the rate hikes.

Institutions own 85% of the float and with its average daily volume of 4.1 million shares, it’s liquid enough to attract and maintain their attention. 

The REIT’s market capitalization of $22.1 billion comes in at less than that of Prologis Inc. at $97.4 billion or American Tower Corp. at $91.7 billion but more than that of Invitation Homes Inc. at $20.35 billion.

Weyerhaeuser is on the Raymon James buy list as of late September with a price target of $39. The company was downgraded in mid-September by Bank of America Securities from a buy rating to neutral. The firm lowered its price target for the REIT from $38 to $34. Argus in July had lowered its rating from buy to hold. 

The daily price chart for Weyerhaeuser looks like this:

The stock hit its 2022 low at the end of September and, as October progressed, seemed to have found buyers. That said, it remains an issue that both the 50-day moving average and the 200-day moving average are trending downward. It will take a substantial rally to turn this chart from bearish-looking to bullish. 

Here’s how the weekly chart looks:

The REIT traded all the way down to its slightly uptrending 200-week moving average and found support. It’s almost as if computer programs had been waiting for that level with buy tickets at the ready. Note that Weyerhaeuser did not drop to anywhere near the March 2020 pandemic scare levels — unlike a few other big REITs that seem to be testing support way down there. 

Even with the emerging value stock profile for the company and the successful test of weekly price support (so far), new fears about inflation or hikes in interest rates can always have a negative effect. 

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Not investment advice. For educational purposes only.