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Demand For Wood Help Drive Weyerhaeuser's Earnings

Posted
5/21/2013 5:44:00 PM
By: Investor's Business Daily
Referenced Stocks:WY

With the housing market in recovery mode, homebuilders are not the only way to partake in the comeback. Investors may also want to check outWeyerhaeuser ( WY ).

The Federal Way, Wash.-based firm isn't just a paper company. Weyerhaeuser produces lumber and engineered wood products used in homebuilding. The firm is one of the biggest owners of timberland in the nation. It owns or controls 6 million acres of timberlands, mostly in the United States.

Weyerhaeuser also builds homes and makes cellulose fiber products.

Thanks to strong lumber demand for housing, growth has been red hot recently. Earnings surged by triple digits or higher in some of the latest quarters.

In April, Weyerhaeuser reported a first-quarter profit of 26 cents a share, up 1,200% from the 2 cents it earned a year ago. Helped by solid demand for wood products, sales grew 31% to just over $1.95 billion. That marked the fourth straight period of growth acceleration.

Weyerhaeuser has a rocky track record of annual earnings. It lost money from 2007 to 2009, but made money over the next three years. Still, the lower profit in 2011 gives Weyerhaeuser a three-year Earnings Stability Factor of 35 on a scale of zero (stable) to 99 (volatile), which is not great.

Earnings in 2011 fell sharply, mostly due to the lack of special items that helped its bottom line in 2010. Weyerhaeuser changed to a real estate investment trust in 2010.

Last month, it boosted its quarterly dividend by 18% to 20 cents a share. On an annual basis, Weyerhaeuser pays 80 cents a share, which works out to a yield of 2.5%.

Since becoming a REIT, the firm has raised its dividend over 33%.

The stock is near the upper end of a buying range from a rebound off its 10-week moving average.