7 Lodging REITs: Report On Recent Performance And Dividend Rates

Includes: DRH, HPT, HST, HT, LHO, PEB, SHO
by: Zvi Bar

Many investors appreciate REITs for the dividend income stream that the REIT model usually necessitates. They also may appeal to individuals who want exposure to real estate as an asset class that might appreciate after any coming inflation.

Many lodgers have seen less business since the financial downturn, as both business and pleasure travel sustained declines due to the economic contraction. This is an analysis of seven lodging REITs, primarily owning hotels and/or motels across the price spectrum and servicing both business and recreational travel. I have included present yields, if any, as well as the 1-month and 2011-to-date performance rates for each lodging REIT.
Diamondrock Hospitality Co. (NYSE:DRH)
  1. Current Yield: 3.9%
  2. 1-month performance: -28.73%
  3. 2011-to-date performance: -39.25%
Hersha Hospitality Trust (NYSE:HT)
  1. Current Yield: 5.8%
  2. 1-month performance: -28.32%
  3. 2011-to-date performance: -42.11%
Hospitality Properties Trust (NYSE:HPT)
  1. Current Yield: 7.9%
  2. 1-month performance: -13.13%
  3. 2011-to-date performance: -4.08%
Host Hotels & Resorts Inc. (NYSE:HST)
  1. Current Yield: 1%
  2. 1-month performance: -36.4%
  3. 2011-to-date performance: -40.57%
LaSalle Hotel Properties (NYSE:LHO)
  1. Current Yield: 2.3%
  2. 1-month performance: -39.07%
  3. 2011-to-date performance: -40.45%
Pebblebrook Hotel Trust (NYSE:PEB)
  1. Current Yield: 3%
  2. 1-month performance: -26.12%
  3. 2011-to-date performance: -27.6%
Sunstone Hotel Investors Inc. (NYSE:SHO)
  1. Current Yield: N/A
  2. 1-month performance: -42.89%
  3. 2011-to-date performance: -49.36%

As you can see from the 2011-to-date performance of this group (in the chart, below; click to enlarge), mall equity has mostly underperformed the broader equity market.

With the exception of HPT, which is down about 4% so far this year (while now yielding about 7.9%), the other six lodgers are all down between 27 and 50 percent. Most of these moves down have also occurred within the last month.

Higher oil prices through the start of the summer could have also lessened the amount of family travel that traditionally occurs during the season. In any event, the recent reduction to oil prices could make travel more affordable and end up increasing occupancy rates at certain lodgers. Hotels and motels also often require expensive renovation projects, which absorb cash that could otherwise be distributed to shareholders. Many lodgers tend to implement such renovation projects during low occupancy periods.

REITs must distribute at least 90% of their taxable income in order to eliminate the need to pay income tax at the corporate level. Under the current tax laws, REIT dividends are taxed as ordinary income, and not at the lower corporate dividend rate.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.