Weyerhaeuser Company (NYSE:WY)

CAPS Rating: 4 out of 5

An integrated forest products company, Weyerhaeuser grows and harvests trees, builds homes, and makes wood and paper products.


Player Avatar brant0 (79.34) Submitted: 5/1/2008 8:38:40 PM : Underperform Start Price: $20.39 WY Score: -23.53

They're screwed by tanking housing market and tax burdened forest assests.

Member Avatar Glycomix (< 20) Submitted: 4/13/2011 3:20:46 AM
Recs: 0

As a REIT, Weyerhauser provides a 64% to 80% cash return on investment, and it must return 90% of its profits\ to shareholders. Those profits might be considerable because of an expected increase in demand for building materials from both in the US and in the far east.

Weyerhauser is likely to get a lot of business in the next two years from the rebuilding after the Tsunami that struck Sendai province in northwestern Honshu, Japan. The Japanese government has said that it will provide help in the form of low-interest loans to individuals and the provincial government. Weyerhauser is already established in Japan, with four offices in Japan. It also has four offices in China; Weyerhauser is the largest cash-volume US exporter of manufactured goods to China. Because they became a REIT and so don't pay a corporate tax, Weyerhauser's net profit on revenue increased from 0.3% in 2007 to 19% in 2010 after they had became a REIT.

As Weyerhauser(WY) is a Real-Estate Investment Trust (REIT), you don't pay double taxes: corporate tax as well as your individual income tax. Since it doesn't file taxes, Weyerhauser passes on the depreciation of its equipment to the stockholders plus the dividend in the form of a check. Last year each shareholder received $0.20 in dividends for the $15 stock and $12.64 in depreciation. If you paid $16/share on November 6, 2010 and they paid the entire dividend and depreciation in one cheque at the end of the year, you would have gotten a check for $12.84/share on Dec 6, 2010. That's an 80.25% return in a month. If you sold the stock immediately after you gotten the annual dividend, you'd have gotten the equivalent of a 963% annualized return.

That's probably why most REITS add the depreciation refund along with the dividend on the quarterly check or ETF. So, instead of getting a 5 cent dividend per share, the REIT would add the dividend to the depreciation, providing a quarterly check for $3.52/share. If you bought 100 shares of WY at the current price of $22.10/share, your $2,210 would provide you with a quarterly cheque of $352.00 or $1408 divided into four cheques. This is an 63.7% annual return on your investments. It could be compounded quarterly if you had your broker automatically reinvest these payments into your stock.

Two things are apparent.


1. gives a GREAT cash return.

2. may provide a higher yield because it doesn't have to pay corporate taxes. It passes the increase in income on to the stockholder.

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