A Yield to Caution

Article Excerpt

NORBORD INC. $56 (Toronto symbol OSB; Shares outstanding: 86.6 million; Market cap: $4.8 billion; Dividend yield: 4.3%; www.norbord.com) is one of the world’s largest producers of oriented strand board (OSB). That’s an engineered wood-panel product used as a plywood replacement in home construction. Norbord continues to report record profits. The gains are thanks to strong OSB demand across North America on sustained growth in new home construction and remodelling. The company raised its quarterly dividend by 20% in December 2017, to $0.60 from $0.50. That gives the shares a 4.3% yield. On top of that, and in response to its record profits, Norbord will also pay a special dividend of $4.50 a share in September 2018. Outside of the massive dividend payment for September, the company will maintain (or raise) its attractive dividend rate only as long as OSB prices are strong. Prices for the material could soften significantly next year as new plants open to take advantage of high prices. Norbord is up 78% over the…