REIT conversion brightens its prospects

Article Excerpt

WEYERHAEUSER CO. $49 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 211.4 million; Market cap: $10.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 0.4%; WSSF Rating: Extra Risk) is a major North American lumber and paper producer. The company’s shareholders recently approved its plan to convert to a real estate investment trust (REIT). REITs pay little or no income tax. As well, they must pay 90% of their earnings to their shareholders as dividends. Many of Weyerhaeuser’s rivals operate as REITs, so this conversion will give it a tax advantage they now enjoy. Weyerhaeuser will probably convert to a REIT by the end of this year. The company must make a one-time distribution of its retained earnings to its shareholders when it converts. It expects this special dividend to total $6 billion. The IRS requires at least 20% of this payout to be in cash. At the end of 2009, Weyerhaeuser held cash of $1.9 billion, or $9.04 a..