- Hersha Hospitality Trust making moves to focus properties to meet company goals.
- Recently announced dividend continues to provide solid yield.
- Common stock and preferred stocks all attractive to the yield seeking investor with capital gain potential.
Hersha Hospitality Trust (NYSE:HT) announced its quarterly dividend for the quarter recently. Continuing its trend of consistent dividend payments, this quarter's dividends payable for shareholders of record on April 1 are $.06 per common share, $.50 per preferred class B share and $.4297 per preferred class C share. These amount to yields of 4.2%, 7.87% and 7.47% respectfully. Each stock class presents different pros and cons, with the common stock and the two classes of preferred stock having the greatest disparity, but each having different advantage.
When I last wrote on HT, the company was in the midst of divesting non-core hotel properties. This has been completed and the management team has begun redeploying this capital into additional quality "urban gateway hotels." This is the focus of the company and a good strategy, especially as these properties increase holdings in the Miami market and continue diversifying into the West Coast (this quarter the Los Angeles area) market. This is being recognized and the common stock has risen 5.9% in the past three months (from Seeking Alpha's own calculations) and yield has dropped slightly to 4.1% from 4.3%. Revenue was up 12% year over year in recently reported results, and while this was a "miss" from estimates, still is an encouraging sign that management's changes are working out well. Another positive for capital gains in the common is the recent expansion at favorable terms of the $500M senior unsecured credit facility. The common stock may be poised for positive gains.
Hersha Hospitality has two classes of preferred stock outstanding: Class B and Class C. Class B preferred trades at a slight premium to par of $25.54 and is callable at par in May of 2016. With the most recently announced dividend of $.50, the yield is 7.87%. The Class C preferred trades at a discount to par of $23.01 and a current yield of 7.47%. Of note, these shares aren't callable until March of 2018, and the yield to call due to the discount has been hovering around 9% annually.
Summary and my view
While I am still long HT Preferred C, this quarter's results and yield has me equally weighting all three classes in my recommendation. The common stock is beginning to slowly climb as management's focus and moves are paying off. While likely to be called at par, the Preferred B yields .4% more than the Preferred C and the premium is less than one dividend payment. That said, I am content with the Preferred C I own and will continue to reinvest dividends each quarter as well. Regardless, please take a close look and see if HT common or the preferred stocks meet your investment needs.
Additional disclosure: I am long HT preferred C shares not HT common