This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is It Safe? Weyerhaeuser Dividends in Doubt

In February, Standard & Poor's downgraded Weyerhaeuser's credit rating to "BBB-minus," one step above junk status, from "BBB," compounding its woes.

The company had negative cash flow for the past two quarters, a trend that will likely continue, said S&P credit analyst Pamela Rice in a report. The 109-year-old firm's 5.7 million acres of forest and other assets "should allow them to weather the remainder of the housing downturn," she said.

Investors have questioned whether Weyerhaeuser should convert into a real estate investment trust, or REIT. The arrangement would force the company to pay 90% of its income to shareholders as dividends. The company would benefit by reducing its taxes.

While rivals Plum Creek Timber (PCL - Get Report), Rayonier (RYN - Get Report) and Potlatch (PCH - Get Report) have taken that route, some analysts question whether the move would help Weyerhaeuser. If the company was to become a REIT, it would have to meet asset and income regulations that might strain its resources or prove too restrictive.

Weyerhaeuser has a few factors working in its favor. The company reduced its debt by 19% last year to $6 billion and boosted its cash to $2.29 billion. It has been closing factories and laying off workers to cut costs.

Those improvements might help Weyerhaeuser short-term, but the company will continue to suffer until consumers start buying new homes again. We've assigned the company a D grade, a recommendation to "sell." Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!
Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
PCL $36.54 0.00%
PCH $34.36 0.00%
RYN $24.71 0.00%
WY $31.44 0.00%
AAPL $94.19 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs