Here's Why Ashford Hospitality Trust Is Plunging Today

What happened

Hotel real estate investment trust Ashford Hospitality Trust (NYSE: AHT) is under pressure on Friday after declaring its latest quarterly dividend. To make a long story short, the company decided to cut its quarterly payout in half, from $0.12 a share to just $0.06.

It would be fair to say that investors are disappointed with the news. As of 12:30 p.m. EDT, Ashford's stock had plunged by nearly 15% to a new 52-week low.

Hotel room key in door.

Image source: Getty Images.

So what

Before rushing to judgment, let's take a closer look at why Ashford cut its dividend.

According to Ashford's president and CEO, Douglas Kessler, in a statement, "This adjustment effectively preserves capital for more advantageous purposes including strengthening our balance sheet and enhancing our ability to pursue more opportunistic growth such as acquisitions that qualify for our Enhanced Return Funding Program ("ERFP")."

To be fair, I wouldn't exactly call this dividend cut surprising. A yield in excess of 10% should be considered a red flag by REIT investors. And with a roughly $375 million market cap and about $4.2 billion in mortgages, Ashford probably should take steps to reduce its leverage.

Now what

Dividend cuts are almost always perceived as bad news, and that's especially true in the real estate sector. After all, most people who invest in REITs do so not only for high dividends but for steady income.

While Ashford's dividend cut was undoubtedly done with the company's financial well-being in mind, it's certainly a disappointment for investors who were hoping for the stock's double-digit yield to continue.

10 stocks we like better than Ashford Hospitality Trust
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Ashford Hospitality Trust wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of March 1, 2019


Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More