Ashford Hospitality, Aircastle 'Enhance Liquidity'

It is interesting to see a company dance around a dividend cut in its press release. You can see from the title of the release (Ashford Hospitality Trust Enhances Liquidity Position Through Strategic Transactions) that Ashford Hospitality (AHT) went for the euphemism “Enhancing liquidity”. The suspension of the dividend is not mentioned until about the 6th paragraph of the press release.

I have noticed a couple of interesting items over the last few weeks. First, both AHT and Aircastle Ltd. (AYR) were significantly later (a week or so) than the previous year to announce their dividend position for the current quarter. It appears that boards of directors will drag their feet a little before announcing bad news. Or maybe it just takes them a while to come up with the best terminology.

I added a small position of AHT to this site’s Opportunities Portfolio on November 6. I understood that the market was pricing the stock for a dividend cut and thought the company had a chance to keep paying a significant payout. I was wrong. At this point I plan to “sell” the position out of the portfolio. It was interesting to see the stock price increase after the announcement was made to suspend the dividend. I guess all of the bad news was already priced into the stock.

My thoughts on Aircastle are a little different. I was disappointed when it cut the dividend, but still think the financial position of the company is strong. The new dividend still gives the stock a yield close to 8%. The company is a cash generating machine and I hope it does something in 2009 to enhance shareholder value. Either resumption of the higher dividend or some asset purchases to increase cash flow would be positive. AYR will remain a component of my site’s Income Portfolio.

At this point I see a lot of fear that an extended economic recession will start to have an increasingly negative effect on business and individuals. I am more of the belief that the economy will have a blow-out-bad 4th quarter then start to recover. It takes a while for the various economic stimulus packages to start to stimulate economic activity and signs of their impact should start to show in the 1st quarter. The inauguration of President Obama should give a psychological boost to the country and the rest of the world.

Comments

[beabaggage:]

Sold mine after div announcement, mgmt scammers for sure. few weeks before all announcements, pres, who had been a buyer of common, bot nice chunk of pfd's. then declares pfd divs and elim common. they led everyone to believe with no debt due next few yrs, lots of cash, low libor debt etc. they would be ok to ride out recession. now they appear to be headed toward bankruptcy for sure. reits almost disappeared in the 70s and this 70's like recession mess we are just starting out in will eliminate a lot more now. most have just too much debt and not enough cash flow.

2008 Dec 30 08:21 AM

[sr9web:]

This author is trying to use SA to feed customers to his web site which charges for information. Boooo... Hissss...

2008 Dec 30 02:59 PM

[Tim Plaehn:]

All of the articles on my site are free to anyone who wants to read them. Portfolio positions are proprietary and I charge a small fee to see them. Sorry if you cannot afford $10.

2008 Dec 30 05:41 PM

[dougtrvl888:]

I think AYR & Aht are both great long term buys at these prices. The reason the price went up when Aht eliminated its 4th quarter divi is they retaining cash for this downturn. This ceo has a lot of experience, & has sold many hotels pre-emptively to build up the cos cash position. They still plan to have a min distributed divi in 09.
Long on both AYR & AHT, & NRF.


On Dec 30 05:41 PM Tim Plaehn wrote:

> All of the articles on my site are free to anyone who wants to read
> them. Portfolio positions are proprietary and I charge a small fee
> to see them. Sorry if you cannot afford $10.

Jan 05 01:36 PM

[User 363760:]

Great article. Not like the pumping done by Larry Meyers all the time.

Feb 24 07:59 PM