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Timber company shares jump after dividend announcement
14/07/2010
Leading global timber company, Weyerhaeuser Co., has seen its company shares jump more than eight per cent, after it revealed a record $5.6 billion dividend pay-out on Monday.
The company is seeking to be classified as a Real Estate Investment Trust (REIT), in a move that will eliminate the 35 per cent corporate tax it is charged. REITs pass all of their profits straight on to their shareholders. The move prompted investment advisors to move its status from 'neutral' to 'buy.'
It is the latest in a line of timber companies to make the move, following in the steps of companies including Plum Creek Timber Co. and Potlatch Crop.
Chief executive, Dan Fulton, said it was part of efforts to ensure the company's long-term recovery, after it endured particular hardships during the global recession.
"We'll be a more attractive stock to hold because of our earnings," Fulton said, adding that a REIT structure would qualify earnings flowing from Weyerhaeuser's timberlands.
"It’s a pass-through structure and so as we pay dividends from those qualified earnings to our shareholders, they will receive them and be effectively taxed at a capital gains rate rather than an ordinary income rate."
The company was founded in Federal Way, Washington by German immigrants in 1900 and harvests timber, manufactures and sells forest products and is also a real-estate developer. Since the recession it has been shedding manufacturing plants and noncore assets.
The company is seeking to be classified as a Real Estate Investment Trust (REIT), in a move that will eliminate the 35 per cent corporate tax it is charged. REITs pass all of their profits straight on to their shareholders. The move prompted investment advisors to move its status from 'neutral' to 'buy.'
It is the latest in a line of timber companies to make the move, following in the steps of companies including Plum Creek Timber Co. and Potlatch Crop.
Chief executive, Dan Fulton, said it was part of efforts to ensure the company's long-term recovery, after it endured particular hardships during the global recession.
"We'll be a more attractive stock to hold because of our earnings," Fulton said, adding that a REIT structure would qualify earnings flowing from Weyerhaeuser's timberlands.
"It’s a pass-through structure and so as we pay dividends from those qualified earnings to our shareholders, they will receive them and be effectively taxed at a capital gains rate rather than an ordinary income rate."
The company was founded in Federal Way, Washington by German immigrants in 1900 and harvests timber, manufactures and sells forest products and is also a real-estate developer. Since the recession it has been shedding manufacturing plants and noncore assets.
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