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Wyndham Hotels (WH) Could Be a Great Choice

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Wyndham Hotels in Focus

Based in Parsippany, Wyndham Hotels (WH - Free Report) is in the Consumer Discretionary sector, and so far this year, shares have seen a price change of -6.31%. The hotel and resort chain is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.02%. This compares to the Hotels and Motels industry's yield of 0.28% and the S&P 500's yield of 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.52 is up 8.6% from last year. Wyndham Hotels has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 23.05%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Wyndham's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for WH for this fiscal year. The Zacks Consensus Estimate for 2024 is $4.27 per share, which represents a year-over-year growth rate of 6.48%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, WH is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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