Shares of Host Hotels & Resorts, Inc. (HST) hit a new 52-week high, touching $19.35 during the trading session on Dec 23. However, the stock closed the session at $19.29, which reflects a solid year-to-date return of 21.9%. The trading volume for the session was 5.5 million shares.
Despite the strong price appreciation, this Zacks Rank #3 (Hold) stock has abundant of upside left, given its recent dividend hike, portfolio revamping activity, acquisitions and expected long-term earnings growth of 10.40%.
Growth Drivers
This lodging real estate investment trust (REIT) is well on track to improve its overall portfolio through the successful execution of its strategic capital recycling program. As part of this, the company is vending assets from time to time especially to lessen its exposure to non-target markets.
In relation to that, last week, the company disclosed the vending of the Dallas/Addison Marriott Quorum for $55.7 million. Also, last month, Host Hotels declared the $62 million divestiture of the Four Seasons Hotel Atlanta and the associated office space.
Furthermore, the company has been very keen on boosting its stockholders’ return by continuously increasing its dividend payout. As part of such efforts, recently Host Hotels hiked its quarterly cash dividend by 8.3% sequentially to 13 cents per share. Notably, the company’s history of increasing its quarterly dividend reflects its long-term strategy to provide attractive risk-adjusted returns to shareholders.
Though Host Hotels’ third-quarter 2013 results missed expectations, its adjusted funds from operations (FFO) per share grew 8.7% from the prior-year quarter. This was aided by a rise in comparable hotel RevPAR (Revenue per Available Room) that reflected improved average room rates and occupancy growth.
We believe these portfolio restructuring activities bode well for its long-term growth and the dividend hike boosts investors’ confidence. Also, despite the earnings miss, we believe that its solid portfolio gives the company sufficient scope for growth in the quarters ahead.
Estimate Revisions Show Potency
Over the last 30 days, the Zacks Consensus Estimate for 2013 and 2014 remained flat at $1.30 (high end of the guidance range provided by Host Hotels) and $1.45 per share, respectively.
Investors interested in the REIT Equity Trust – Other industry may consider stocks like DuPont Fabros Technology, Inc. (DFT), Sabra Health Care REIT, Inc. (SBRA) and Strategic Hotels & Resorts, Inc. (BEE). All these carry a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.
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