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Originally published December 13, 2010 at 10:00 PM | Page modified December 14, 2010 at 10:41 AM

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Weyerhaeuser tripling quarterly dividend

Weyerhaeuser Co., the second-largest owner of U.S. timberland, plans to triple its quarterly dividend to 15 cents ahead of its ...

Bloomberg News

Weyerhaeuser plans to triple its quarterly dividend to 15 cents ahead of its conversion to a timber real-estate investment trust (REIT).

The first payment is expected to be in March, Federal Way-based Weyerhaeuser said in a statement Monday.

The company, the second-largest owner of U.S. timberland, will convert to a REIT when it files its 2010 tax return next year and the conversion will be retroactive to Jan. 1, 2010, Weyerhaeuser spokesman Bruce Amundson said Monday.

The company is converting to a REIT to reduce the tax on its more than 6 million acres of timberland. Weyerhaeuser paid a $5.6 billion special dividend in September to meet U.S. tax requirements for the conversion.

"From a bond-rating standpoint, I'm comfortable with the increased dividend," said Ed Sustar, a Toronto-based vice president and senior credit officer at Moody's Investors Services. "I would be uncomfortable if it was any higher."

Moody's rates Weyerhaeuser's debt Ba1, one level below investment grade.

Weyerhaeuser stock rose 14 cents to $17.90 Monday. The shares have gained 12.2 percent this year.

The dividend is "one that is sustainable and that we expect to grow over time," Weyerhaeuser Chief Executive Daniel Fulton said in the statement, adding the company doesn't "anticipate significant improvement in the housing market in 2011."

The increased dividend will boost Weyerhaeuser's annual gross dividend yield to 3.35 percent, based on the stock's closing price Monday, compared with 4.55 percent for Seattle-based Plum Creek Timber, also a REIT and the largest owner of U.S. timberland.

Weyerhaeuser's overall tax rate will fall to about 18 percent in 2010 from 36 percent last year, Sustar said in a Dec. 3 note.

The conversion will also cut the company's cost of capital, helping it to compete with other timber REITs, Fulton had said in July.

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