Weyerhaeuser Company (NYSE:WY) -- Special $5.6 Billion Dividend on the Way

Weyerhaeuser Company (NYSE:WY) is a Washington-based forest products company, and it’s paying out a special $5.6 billion dividend as part of its strategy to convert into a real estate investment trust (REIT). Here to explain the impact on shareholders is Byron W. King, the Agora Financial editor of Outstanding Investments.

Here are the details from his most recent reader update:

“This week, Weyerhaeuser Co. (NYSE:WY) declared a special $5.6 billion dividend to shareholders. Weyerhaeuser expects to pay the special dividend on Sept. 1, to shareholders of record as of July 22, 2010.

“This is part of the company’s plan to convert to a real estate investment trust (REIT). According to Dan Fulton, president and CEO, ‘The REIT structure best supports our strategic direction and positions Weyerhaeuser for future growth. The tax efficiency of the REIT structure also will enable us to increase our timberland earnings and make higher distributions to our shareholders.’

“In December 2009, Weyerhaeuser decided to convert from a traditional corporation to a REIT. Weyerhaeuser is evolving from a diversified forest products company into a company more narrowly focused on growing and harvesting timber. That is, it’s much more of an upstream resource play.

“Over the past few years, Weyerhaeuser has backed away from pulp, paper and container board operations. Part of it is to deal with a changing marketplace. Part of it is necessary to rebalance the mix of businesses in order to qualify as a REIT. But the change into a REIT cannot happen until shareholders receive a special dividend payment for undistributed earnings and profits of between $5.5-5.7 billion.

“Shareholders can elect stock or cash for the special dividend, with the total cash payment limited to 10%, or $560 million, of the total distribution. If cash elections exceed the approved amount, shareholders will receive a pro rata amount of their distribution in cash and the remaining portion in stock.”

Byron W. King also points out that a new Weyerhaeuser prospectus includes a full description of the special dividend, including key dates and the securities to be issued in the special dividend. To keep following the details on WY, and to learn King’s specific recommendations regarding the stock, you should subscribe to his newsletter, Outstanding Investments, which you can find on the Agora Financial reports page, available here.


Rocky Vega,
The Daily Reckoning

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]