Talk of forest and paper company Weyerhaeuser Co. (NYSE:WY) converting into a REIT has been around for a few years. But now the company is publicly stating that a REIT conversion may be part of a future overhaul that would save the company millions in taxes.
Already, Weyerhaeuser has cut its dividend to 5 cents per share from 25 cents to save around $85 million annually to give it more financial flexibility. And the Federal Way, Wash.-based company also closed a lumber mill in Taylor, La.
The primary reason Weyerhaeuser is looking to make a change is the rising cost of raw materials and energy compared with the falling demand for building materials accompanying the decline of the housing market. As a REIT, Weyerhaeuser would benefit from a reduced tax bill as profits were distributed to investors. Nor would the conversion be something new in the industry as forest products company Potlatch Corp. (NYSE:PCH) changed to a REIT in 2006.
Weyerhaeuser president and chief executive officer Dan Fulton said in a statement Tuesday:
Although our guidance for the recently completed quarter remains unchanged, the economic outlook for our businesses continues to be challenged and uncertain. In light of these conditions, this dividend decision enhances our current liquidity and provides for more financial flexibility, including a possible REIT conversion should the board make that decision in the future.
- Gerald Magpily
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