With the payment of a $5.6 billion special dividend on September 1, 2010, Weyerhaeuser (WY) will have satisfied all of the requirements for its conversion to a real estate investment trust (REIT). We described the tax implications of the dividend in our previous post. Neena Mishra, Forisk’s Director of Equity Research, comments on the results of the WY shareholder vote regarding the distribution of the special dividend:

Shareholders of record at the close of business on July 22 were able to elect stock or cash for the special dividend and the results of the election were announced yesterday. Shareholders representing 66% of the shares outstanding elected to receive the special dividend in cash. However, since the cash portion of the dividend is capped at 10% of the aggregate, or $560 million, shareholders who elected cash will receive approximately $4.03 per share, or 15% of their special dividend, in cash and the balance in stock.

The remaining shareholders will receive the special dividend entirely in stock. The number of shares to be issued for the stock portion of the dividend will be determined this week by the average closing price of WY stock on August 24, 25 and 26.  Since the number of shares outstanding will go up substantially after the payout, the company may consider a reverse stock split in the coming months.

The accounting impact of the dividend on the financials would be a reduction in cash by $560 million, as well as a reduction in the deferred tax liability by approximately $1 billion (the tax liability previously recorded for the book versus tax basis difference in the timberland) and thus the net impact would be an increase in the shareholders’ equity by $440 million. The company will also recalculate the 2010 tax expense to reflect the REIT tax treatment.

WY will provide guidance on its future dividend policy in the fourth quarter. As we stated in earlier posts, we expect WY’s dividend payout to increase substantially after its REIT conversion to be more in-line with the dividends paid by the other three timber REITs:  Plum Creek (PCL), Rayonier (RYN) and Potlatch (PCH).