Ushering in good news for its shareholders, Chatham Lodging Trust (CLDT) announced a 25% hike in its monthly dividend rate to 10 cents from 8 cents paid earlier. The new dividend will be paid on Feb 27, 2015 to shareholders of record as on Jan 30.
Based on this increased rate, the annualized dividend comes at $1.20 per share, resulting in an annualized yield of about 3.9% considering Chatham Lodging's closing price of $30.76 on Jan 13.
Chatham Lodging has been consistent in enhancing its shareholder’s wealth with dividend payouts. In fact, this hotel real estate investment trust (“REIT”) has increased its annual dividend each year since its initial public offering (“IPO”) in 2010, raising it to $1.20 in 2015 from 35 cents in 2010, reflecting a total hike of 243%.
We believe that Chatham Lodging has an adequate capacity to support its dividend policy. The company’s adjusted funds from operations (“FFO”) per share have reported growth per annum of around 30% since 2010. This hotel REIT is further poised to report solid FFO growth in 2015 as well, given its strong portfolio.
The dividend hike also demonstrates Chatham Lodging’s solid cash flow generating capabilities. With a solid performance in 2014, the company expanded its portfolio substantially. Hotel investments worth over $500 million were made that helped drive the company’s owned and joint venture assets to more than $3 billion. We believe such opportunistic investments would help it ride on the growth trajectory and reward its shareholders accordingly.
As a matter of fact, solid dividend payouts are arguably the biggest attraction for REIT investors. In addition to Chatham Lodging, a number of other REITs came up with dividend hike announcements, off late.
Among them are DDR Corp. (DDR) that announced an 11% hike and Ventas Inc. (VTR) which disclosed a 9% increase. Also, SL Green Realty Corp. (SLG) had earlier announced a 20% increase in its fourth-quarter 2014 dividend.
Chatham Lodging currently carries 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.
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