"Do you know the only thing that gives me pleasure? It's to see my dividends coming in." - John D. Rockefeller.
One of the themes to my income portfolio these days is getting ahead of the stagflation I see coming for the years ahead driven by the fiscal and monetary policies of the last few years. This means investing in high yielders whose cash flow comes from hard assets that can be expected to appreciate in an environment with significantly more inflation. This means REITs and energy MLPs.
Here are two hotel REITs with solid yields and cheap valuations that should do well in such an environment. Hospitality Properties Trust (HPT) is a real estate investment trust. It owns and leases mainly mid-tier hotel properties operating mainly by Marriott and Intercontinental. It runs approximately 288 hotels with 42,632 rooms and 185 travel centers located in 44 states in the U.S., Canada.
4 reasons HPT belongs in your income portfolio at $24 a share:
- HPT yields almost eight percent (7.7%) and recently raised its payout five percent.
- The trust is growing revenue at a 6% to 7% clip and HPT has a reasonable five year projected PEG (1.58) for such a high yielder.
- The company's 7.7% nearly matches its forward P/E (7.66).
- Insiders have made no significant sales in two years and the stock chart has turned positive recently.
Chatham Lodging Trust (CLDT) is a self-advised REIT that was organized to invest in upscale extended-stay hotels and premium-branded, select-service hotels. The company currently owns 18 hotels, with an aggregate of 2,414 rooms/suites in 10 states and the District of Columbia, and holds a minority investment in a joint venture that owns 64 hotels with 8,329 rooms/suites.
4 reasons CLDT provide value and solid income at under $15 a share:
- This has been my favorite play in the sector for quite some time. CLDT pays a dividend of 5.4%. It recently raised its payouts by 5% and moved to a monthly payout schedule from quarterly.
- Insiders have been net buyers of the stock over the last year
- This high yielder is cheap at just over 9x forward earnings.
- CLDT sells for just 97% of book value and has a tiny five year projected PEG (.40) as well.
Disclosure: I am long CLDT.