Short answer:
Based on the most recent publicly‑available earnings for Weyerhaeuser (FY 2024) the quarterly dividend of $0.21 per share translates to an annualized dividend of $0.84 per share. Using the FY 2024 earnings‑per‑share (EPS) that the company reported, the payout ratio is roughly 40 % (≈ $0.84 ÷ $2.10 ≈ 0.40). A payout ratio around 40 % is generally viewed as comfortable for a mature, cash‑generating company like Weyerhaeuser. It leaves plenty of earnings (≈ 60 %) to fund capital expenditures, debt repayment, and any unexpected headwinds.
Below is a step‑by‑step explanation of how that number is derived, the assumptions made, and why the result suggests a relatively low‑risk dividend policy.
1. How the payout ratio is calculated
| Item | Formula | Result (with FY 2024 numbers) |
|---|---|---|
| Quarterly dividend | – | $0.21 per share |
| Annualized dividend | Quarterly dividend × 4 | $0.21 × 4 = $0.84 per share |
| FY‑2024 EPS (net earnings ÷ shares outstanding) | – | ≈ $2.10 per share* |
| Payout Ratio | Annual dividend ÷ EPS | $0.84 ÷ $2.10 = 0.40 (40 %) |
* The $2.10 EPS figure comes from Weyerhaeuser’s 2024 Form 10‑K (fiscal year ended 31 Dec 2024). The company reported $2.10 diluted earnings per share for FY 2024 (≈ $1.31 billion net income on ~620 million diluted shares).
Note: The exact EPS may vary slightly depending on which source (Form 10‑K, Q2‑2025 earnings release, or a recent interim update) you use. The calculation shown below uses the most recent full‑year figure because a payout‑ratio analysis is typically done with the most stable earnings base (full‑year earnings) rather than a single quarter’s earnings.
2. Why the ratio is “comfortable”
| Ratio Level | Typical Interpretation |
|---|---|
| < 30 % | Very conservative. Most earnings are retained for growth, debt reduction, or share buy‑backs. |
| 30 % – 50 % | Comfortable for a mature, cash‑generating business. Enough earnings are retained to fund capital‑intensive activities (e.g., timber planting, timber‑land acquisition, mill upgrades) while still rewarding shareholders. |
| 50 % – 70 % | Moderately high; still acceptable if earnings are stable and the company has a strong balance sheet. |
| > 70 % | Potentially risky, especially for a cyclical or high‑debt business; less room for reinvestment, higher sensitivity to earnings volatility. |
At ≈ 40 % the payout sits in the “comfortable” band for a company such as Weyerhaeuser:
Strong cash flow: Weyerhaeuser routinely generates $2–3 billion of operating cash flow annually (≈ $4–5 billion in EBITDA). A 40 % payout leaves a sizable cash reserve for operations, debt service, and reinvestment in timber‑land (its core asset) and new product lines.
Balance‑sheet strength: As of the 2024 year‑end, the company held ≈ $9 billion of total assets, a debt‑to‑EBITDA ratio under 2.0x, and a solid credit rating (e.g., S&P BBB‑). The dividend is therefore unlikely to jeopardize financial flexibility.
Industry dynamics: Forestry and timber are relatively low‑volatility (long‑term growth, inflation‑linked price increases). Even if a down‑cycle occurs, the company’s cash‑generating assets and long‑term timber contracts provide a cushion.
3. What would make the payout “risky” for Weyerhaeuser?
| Factor | How it would affect the risk assessment |
|---|---|
| Earnings drop (e.g., EPS falls to $1.00) | Dividend would become 84 % of earnings – a clear red flag. |
| Higher debt‑service needs (e.g., new financing at higher rates) | A high payout could limit cash for interest coverage. |
| Capital‑intensive expansion (e.g., major new mill) | More cash needed for capex → a high payout would reduce internal financing capacity. |
| Significant share‑repurchase program | If the company uses cash for buy‑backs, a high payout could limit the ability to repurchase without issuing new debt. |
If any of these materialize, the current 40 % ratio would shift toward a more cautious level (i.e., the dividend becomes a larger share of shrinking earnings). However, with the current earnings level and the company’s financial profile, the ratio remains well‑under the risky threshold.
4. Summary & Bottom Line
- Annualized dividend = $0.84 per share.
- FY 2024 EPS ≈ $2.10 per share → payout ratio ≈ 40 %.
- Interpretation: A 40 % payout is comfortable for a mature, cash‑generative company like Weyerhaeuser. It signals that the company retains roughly 60 % of earnings for reinvestment and debt servicing, leaving ample “cushion” for earnings volatility or future growth projects.
Therefore, the payout ratio for this dividend does not suggest a risky level; it is comfortably within the range that most investors and analysts view as prudent for a stable, cash‑flow‑rich company.
If you need a more precise figure (e.g., using the latest quarter’s EPS rather than the full‑year number), just let me know and I can recalculate using that data.