WEYERHAEUSER CO. $20(New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 537.5 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.0%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products, including paper and packaging. The company owns or leases over 20.3 million acres of timberland in the U.S. and Canada.
In 2010, Weyerhaeuser converted to a real estate investment trust (REIT). REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.0% annualized yield.
The company continues to sell less profitable assets: in 2011, it sold $838 million of real estate.
Weyerhaeuser is using the proceeds to expand its main lumber business and pay down debt. On March 31, 2012, its long-term debt was $4.0 billion, down from $4.7 billion at the end of 2010. Even so, the current figure is still a high 37% of its market cap.
Weyerhaeuser’s earnings fell 58.2% in the first quarter of 2012, to $41 million from $98 million a year earlier. Earnings per share fell 55.6%, to $0.08 from $0.18, on fewer shares outstanding. If you exclude unusual items, such as the gains on its asset sales, the company would have earned $0.02 a share, up from nil per share a year earlier. Revenue rose 5.1%, to $1.5 billion from $1.4 billion.
The stock is down 8% in the past year, mainly because of investor concern about the company’s exposure to the weak U.S. housing market. Even after this drop, the stock still trades at a high 26.7 times the $0.75 a share that Weyerhaeuser should earn in 2012.
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