Consistent with its efforts to enhance stockholders’ value, Hersha Hospitality Trust (HT) raised its quarterly cash dividend by 16.7% to 7 cents per share from 6 cents paid earlier. The new dividend will be paid on Oct 15, 2014 to shareholders of record as of Oct 2.
Based on this dividend, the annualized run rate becomes 28 cents per share, resulting in an annualized yield of about 4.35% considering Hersha’s closing price of $6.43 on Sep 24. While the stock fell in a number of past trading sessions on broader market concerns, it recovered 0.3% in yesterday’s regular session on the NYSE.
The dividend hike is backed by the company’s growth in cash flow from ramp-up and stabilization of strategic buyouts as well as development project deliveries. The company also came up with better-than-expected results in the second quarter, delivering an earnings surprise of 6.25%. Over the last four quarters, the company’s average earnings surprise came in at 21.78%, which is encouraging.
This real estate investment trust (REIT) owns and operates high quality upscale hotels in urban gateway markets, boasting a portfolio of 52 hotels (8,403 rooms) across New York, Boston, Philadelphia, Washington, DC, Miami and select markets on the West Coast.
Going forward, we believe that amid improving market fundamentals, the addition of hotels in Manhattan and an increased exposure to the high-growth regions in West Coast market and South Florida, the company remains well poised to ride on the growth trajectory.
Hersha enjoyed considerable financial flexibility with around $29.2 million of cash and cash equivalents, and significant capacity under its revolving line of credit as of Jun 30, 2014. Given its financial strength, it will not be difficult for the company to make the payments.
Again, the company’s LTM (last twelve-month) funds from operations payout ratio remains favorably low at 60% as of Jun 30, 2014. It implies further potential of the company to raise the quarterly cash dividend per common share.
As a matter of fact, solid dividend payouts are arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Hersha currently carries a Zacks Rank #3 (Hold). Investors interested in lodging REITs may consider better-ranked stocks like Chatham Lodging Trust (CLDT), Diamondrock Hospitality Co. (DRH) and RLJ Lodging Trust (RLJ). All three stocks hold a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment