Chatham Lodging Trust Offers Investors 6%-Plus Dividend Yield (CLDT)
By: Ned Piplovic,
The Chatham Lodging Trust (NYSE:CLDT) is currently offering its shareholders a dividend yield in excess of 6%, which is higher than the company’s own average yield over the past five years, and also outperforms industry averages.
Additionally, the company has boosted its annual dividend payout amount every year since it started distributing dividends in 2010. The company’s share price lost nearly half of its value in 2015 and has been trading somewhat flat with increased volatility since then. However, the volatility has subsided since February 2018, and the share price has been rising steadily and has gained nearly 20% since its February low.
Interested investors should make sure than this stock fits within their investment portfolio strategy. The above-average income is attractive, and the current share price trend should be under observation. While still below the 200-day moving average (MA), the share price’s 50-day MA has been rising since early May 2018. The share price is currently above both moving averages. If the current uptrend continues, the 50-day could break above the 200-day MA in a bullish manner within the next 30 days.
However, some investors might wish to take the chance and assume a long position in CLDT before the next ex-dividend date on July 30, 2018 and take advantage of the 6% dividend yield. Investors that wish to receive the next dividend distribution on the August 31, 2018, pay date must attain shareholder of record status before the ex-dividend date. However, investors that are more risk averse could wait for the moving averages to give a clearer indication of the continued uptrend. This strategy could cause a delay in collecting dividend payouts of a few months with many other equities. However, since CLDT pays its dividends monthly, the delay would be minimal and worth the wait for some investors that are risk intolerant.
Chatham Lodging Trust (NYSE:CLDT)
Chatham Lodging Trust (CLDT) is a real estate investment trust (REIT) that invests in upscale, extended-stay hotels and premium-branded, select-service hotels. The company owns a stake in 140 hotels under multiple brand names that include Homewood Suites by Hilton, Residence Inn by Marriott, Hyatt House, Courtyard by Marriott, Hampton Inn and Hampton Inn and Suites. As of May 2018, the company wholly owned 45 hotels in 14 states and the District of Columbia with a capacity of more than 5,800 rooms and suites. Since the company operates as a REIT, it is not allowed to operate its own properties. Therefore, Chatham Lodging works closely with its third-party hotel managers to maximize return on their investment. In addition to its wholly owned locations, the REIT owns minority interests in two joint ventures that operate 95 properties with an aggregate capacity of approximately 12,500 rooms across 23 states.
Chatham Lodging Trust’s current monthly dividend payout of $0.11 converts to a $1.32 annualized distribution. This annualized amount is equivalent to a 6.1% dividend yield, which is almost 17% above the REIT’s own 5.2% five-year average dividend yield.
The company’s current 6.1% dividend yield is nearly double the 3.06% average yield of the overall Financials sector and exceeds the Hotel Industry REIT segment’s 3.68% simple average yield by 65%.
The company started dividend distributions in late 2010, paid quarterly distributions until the beginning of 2012 and switched to monthly payouts in 2013. The REIT has raised its total annual dividend amount every year since 2010 at an average growth rate of 9.5% per year and nearly doubled its annual dividend total over the past seven years.
The REIT also provided a small share price growth over the past year to accompany the outsized dividend income distributions. The share price rose more than 30% from the onset of the trailing 12-month period to reach its 52-week high of $23.76 on December 18, 2017. After peaking in late 2017, the share price lost 23.5% and dropped to its 52-week low of $18.18 on March 1, 2018. However, the share price reversed direction and regained nearly 65% of those losses to close on July 18, 2018, at $21.73, which was almost 20% above the 52-week low from March 2018.
The share price drop of nearly 50% in 2015 erased all benefits of above-average dividend payouts and handed shareholders a total loss of more than 10% over the past three years. However, the situation inverted, and shareholders gained total returns of 10.5% over the past 12 months. Long-term shareholders enjoyed a total return of nearly 46% over the past five years.
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