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Host Hotels (HST) Rewards Investors With a 20% Dividend Raise

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Host Hotels & Resorts, Inc. (HST - Free Report) recently announced a 20% hike in its cash dividend payment to 18 cents per share for the third quarter of 2023 from 15 cents paid out earlier. The move is aimed at enhancing its shareholders’ wealth.

The increased dividend will be paid out on Oct 16 to shareholders on record as of Sep 30. With this latest hike, HST’s annual dividend yield now comes to 4.42% based on the company’s share price of $16.26 on Sep 14, 2023. Moreover, the company has increased its dividend six times in the last five years. Check out Host Hotels & Resorts’ dividend history here.

Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors, and Host Hotels has remained committed to that. After a brief suspension of its dividend payments during the pandemic, the company reinstated its dividend payment and resorted to regular dividend hikes. Even though the reinstated amount of 3 cents was lower than its pre-pandemic level of 20 cents, the company’s recent spate of dividend increases has been encouraging.

Host Hotels owns a portfolio of luxury and upper-upscale hotels in the lucrative Sunbelt region and the top 20 U.S. markets, having strong demand drivers. The continued momentum in leisure travel demand and recovery in business transient demand — led by the healthy demand from small and medium-sized businesses — have aided the company’s comparable hotel revenue per available (RevPAR) growth thus far.  

In the second quarter of 2023, HST’s comparable hotel RevPAR was $255.12, climbing 2.7% from the year-ago quarter’s $219.23. The comparable average occupancy percentage in the quarter was 74.2%, up 20 basis points from the prior-year quarter.

Although the lodging industry may experience a few near-term hiccups owing to the current macroeconomic headwinds and concerns surrounding the potential for an economic slowdown, given the healthy demand for HST’s properties in strategic locations, it is poised to ride the growth curve.

Also, HST’s aggressive capital-recycling program that entails the non-strategic dispositions of assets and redeploying the proceeds for investments in better-yielding assets highlights its prudent capital-management practices and preserves balance sheet strength.

HST is the only company with an investment-grade rating among lodging REITs and had $2.5 billion of available liquidity as of Jun 30, 2023. It enjoyed Baa3 from Moody’s and BBB- from both Fitch and S&P Global as of the end of the second quarter of 2023. Additionally, it has no material maturities until April 2024. With ample financial flexibility, HST remains well-positioned to tide over any challenges and bank on growth scopes.

Hence, given HST’s ability to generate decent cashflows, a lower dividend payout ratio compared with the industry and a solid financial position, we expect the latest dividend rate to be sustainable over the long run.

HST currently carries a Zacks Rank #4 (Sell).

Its shares have gained 1.3% in the year-to-date period against the industry’s fall of 2.2%.

Zacks Investment Research
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Stocks to Consider

Some better-ranked stocks from the REIT sector are Welltower (WELL - Free Report) , SBA Communications (SBAC - Free Report) and Americold Realty Trust (COLD - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2023 FFO per share has been raised marginally over the past month to $3.54.

The Zacks Consensus Estimate for SBA Communications’ current-year FFO per share has moved marginally northward over the past week to $12.91.

The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised 1.6% over the past month to $1.26.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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