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REITs pay 90% of their REIT net income to shareholders by way of dividends. For those seeking income, they can be great investments. But how safe are the dividends of REITs that invest in hotels, and are they a buy at this time? Here we look at five REITs with this question in mind:

Chatham Lodging Trust Co. (NYSE:CLDT): Shares are trading around $10.25, as against their 52-week trading range of $8.82 to $19.24. At the current market price, the company is capitalized at $143 million. Earnings per share for the last year show a loss of $0.23, It paid a dividend of $0.70 last year (a yield of 7.00%).

The company is embroiled in a potential courtroom battle against Innkepers, who allege that it has reneged on a joint deal with Cerebus to buy Innkeepers for a total of $1.1 billion. However, the court case has been delayed twice, and it is thought that Cerebus and Chatham Lodging will agree a lower price with Innkeepers. Any failure to do so will push Chatham’s share price lower. If forced to pay the originally agreed price, earnings on the deal will be lower going forward, and this would affect dividends. Any potential good news is in the share price already. Avoid.

Diamond Rock Hospitality Company (NYSE:DRH): Shares are trading at $7.80 at the time of writing, against their 52-week trading range of $6.30 to $12.63. At the current market price, the company is capitalized at $1.31 billion. The company made a loss per share for the last year of $0.08. It paid a dividend of $0.32 last year (a yield of 4.30%).

The company owns around 20 premium hotels in North America, with around 10,000 guestrooms. Its rooms benefit from business usage, but this may be harmed as businesses pull purse strings tighter. With debt of $1.04 billion, any upward move in short term interest rates may also put pressure on the company. Its hard to see a large upside in the shares from the current level.

Shford Hospitality Trust Inc (NYSE:AHT): Shares are trading at $7.70 at the time of writing, against their 52-week trading range of $5.93 to $14.32. At the current market price, the company is capitalized at $523.83 million. Earnings per share for the last fiscal year showed a loss of $1.39. It paid a dividend of $0.40 last year (a yield of 5.40%).

The company has recently announced that it expects to post third-quarter net income of around $0.38 per share, an increase year on year of over 10%. Luxury accommodation pays dividends! The company is well-funded (it has cash of $225 million), well-managed, and is trading at nearly half its book value of $14.35. Buy.

Pebblebrook Hotel Trust (NYSE:PEB): Shares are trading around $15.75 at the time of writing, as against their 52-week trading range of $14.00 to $22.47. At the current market price, the company is capitalized at $798 million. Earnings per share for the last year show a loss of $0.11. It paid a dividend of $0.48 last year (a yield of 3.10%).

With cash of $140 million, and debt of just $252 million, the management of Pebblebrook run a tight ship and expect it to negotiate the stormy waters of an economic storm successfully. It is on the lookout for quality and value opportunities in the hospitality space, and expect earnings to increase by nearly 30% over the next two years. Although the dividend is lower than others in the sector, it looks safer. Buy.

LaSalle Hotel Properties (NYSE:LHO): Shares are trading around $21 at the time of writing, as against their 52-week trading range of $15.17 to $29.58. At the current market price, the company is capitalized at $1.97 billion. Earnings per share for the last year show a loss of $0.13. It paid a dividend of $0.44 last year (a yield of 2.20%). Shares are trading at the reported book value of $21.04, and look fairly valued. The company has recently announced its intention to repurchase up to $100 million of shares, and this has boosted the share price from $18 at the time of the announcement. In April, the company sold 417,000 shares through its at the market share sale program (and an additional 7.9 million shares in a n underwritten public offering). The share price then was between $25 and $28. In July, the company announced that it had managed to increase its room rates and more fully fill its hotels. It would seem that it trades its rooms as well as it trades its shares. Hold.

Source: 5 Hotel REITs To Buy, Hold, Or Avoid