A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Weyerhaeuser Company (NYSE:WY) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Does Weyerhaeuser tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Weyerhaeuser
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Weyerhaeuser fit our criteria?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. The company currently pays out 161.75% of its earnings as a dividend, according to its trailing twelve-month data, meaning that a portion of dividend payments are funded by retained earnings. However, going forward, analysts expect WY’s payout to fall into a more sustainable range of 71.19% of its earnings, which leads to a dividend yield of around 3.61%. In addition to this, EPS should increase to $1.37, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Compared to its peers, Weyerhaeuser generates a yield of 3.49%, which is on the low-side for REITs stocks.
Taking all the above into account, Weyerhaeuser is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three fundamental aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for WY’s future growth? Take a look at our free research report of analyst consensus for WY’s outlook.
- Valuation: What is WY worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WY is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.