U.S. companies are sitting on a total of more than $1 trillion
incash , but many are being rather stingy with theirdividend
payouts while they wait to see how theeconomic recovery
There is one company, however, whose management was confident
enough to boost its dividend payment recently by 40%. Thisreal
estate investment trust (REIT) has raised its third-quarter
dividend to 28 cents a share, which makes for a 4% annualyield
With 40 hotel properties and 10,600 rooms in the U.S., this
REIT caters to the upscale business travel and leisure travel
markets, which have slowly begun to recover from therecession .
The REIT looks for markets where there are barriers to entry,
making it difficult to build new properties, as well as those
where demand is robust, which allows it to charge profitable
rates on its hotel rooms.
The REIT gets 90% of itsearnings from nine of the U.S.'
largest and best-known metro markets, and its hotels are managed
by such well-known operators as Kimpton, Westin,
Hyatt Hotels (
. The REIT I'm talking about is
LaSalle Hotel Properties (
||After backing out renovation expenses at its Park
Central Hotel in New York, LaSalle'sRevPAR grew 6.7%.
LaSalle'srevenue rose 8.5% in the second quarter from the same
period lastyear , and its revenue for the first half of 2013 rose
about 10% from the first six months of last year. The REIT'sfunds
from operations (FFO) per share -- a measure of earnings that
accounts for a REIT's real-estate-heavy portfolio -- was also up
more than 10% in the second quarter and more than 20% for the
first half of the year.
Perhaps more importantly, the REIT -- whoseprofit margin was a
healthy 37% -- saw itsrevenue per available room (RevPAR) rise
0.9% in the second quarter as hotel occupancies went up, allowing
LaSalle to get better rates for its rooms. After backing out
renovation expenses at its Park Central Hotel in New York,
however, LaSalle's RevPAR grew 6.7%, which may be more indicative
of its revenue growth going forward.
Over the past five years, LaSalle has seen its hotel revenue
grow from $587 million in 2008 to $862 million, with earnings per
share rising nearly ninefold, from 6 cents to 52 cents. The
company has forecastFFO of up to $2.23 a share for the year,
making for aprice-to-earnings ratio of about 11.5.
Risks to Consider:
The hotel sector is very competitive, and demand for rooms
could cool if theeconomy falters again. LaSalle has taken ondebt
on which interest rates could go up, which could cut down on its
profits even though it uses hedges to ward off this risk.
Action to Take -->
REITs are required to pay as much as 90% of theirincome to
shareholders, so there is a good possibility of higher dividend
payments for LaSalle's owners. There is also someupside on
thestock as the REIT continues to grow. Because construction
activity was down during the recession, fewer hotel rooms coming
online as demand is going up, so the REIT is anticipating a
favorable environment for the nearterm .
© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.