Lamar Advertising Co. (NASDAQ: LAMR) has announced that the outdoor advertising and logo sign display company has received communication from the Internal Revenue Service regarding its plan to convert to a real estate investment trust (REIT). The company said that the private letter ruling from the IRS confirms that the company’s income from renting space on outdoor advertising displays qualifies as rents from real property for REIT purposes.

The long and short of the matter is that Lamar’s conversion to REIT status is expected to be effective as of January 1, 2014. Lamar also gave guidance showing that its dividend yield will go through the roof compared to the past.

Lamar’s projected earnings per share will be $2.81 to $2.91, versus a $1.02 estimate, but we would caution that this could include items. The projected 2014 adjusted Funds From Operations (AFFO) will be $4.03 to $4.13 per share.

The company’s 2014 expected annual dividend, which includes non-REIT E&P distribution of $40 million, is being targeted at $2.50 per share. With a $52.33 share price, that generates a dividend yield of almost 4.8%.

Lamar completed an internal corporate restructuring at the end of 2013 so that it would be in compliance with applicable REIT rules for the 2014 taxable year. As a REIT, Lamar will be required to distribute annually at least 90% of its REIT taxable income. This merger to change over to a REIT will be subject to approval by the company’s stockholders.

Lamar’s 52-week trading range is $41.30 to $54.48, and the company’s market cap is roughly 45 billion.

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