Summit Hotel Properties Offers Shareholders 5% Dividend Yield (INN)
By: Ned Piplovic,
Summit Hotel Properties, Inc. (NYSE:INN) reversed its share price downtrend, saw its share price grow by a double-digit percentage over the past 60 days and offers its shareholders a 5% dividend yield.
The company boosted its annual dividend in six out of the seven years since it started paying dividends. The share price is down more than 15% for the trailing 12 months. However, the price spiked uncharacteristically above its recent growth trend in early 2017, which makes the current share price look like a significant drop. While the price decline over the past year handed existing shareholders a double-digit-percentage total loss, the price drop could be an opportunity for investors seeking steadily rising dividend income to seize the opportunity and add this equity to their portfolio at a discounted price.
The company will distribute its next dividend on company’s May 31, 2018, pay date to all its shareholders of record prior to the May 15, 2018, ex-dividend date.
Summit Hotel Properties, Inc. (NYSE:INN)
Headquartered in Austin, TX, and formed in 2011, Summit Hotel Properties, Inc., is a publicly-traded lodging real estate investment trust (REIT) focused on owning premium-branded hotels with efficient operating models. As of February 21, 2018, the company’s portfolio consisted of 83 hotels in 26 states with a total of 12,242 guestrooms. Half of the company’s locations are Marriott International (NASDAQ:MAR) franchises. The Hilton Worldwide brand names comprise nearly 25% of Summit’s locations with the Hyatt Hotel Corporation (NYSE:H) — 18.2% — and the InterContinental Hotels Group PLC (NYSE:IHG) — 6.8% — comprising another quarter of Summit’s current property portfolio. The company focuses on establishing properties in markets that exhibit multiple demand generators, such as business and corporate headquarters, retail centers, airports and tourist attractions. In the company’s current portfolio, nearly 90% of the properties are in one of the top 50 metropolitan statistical areas (MSAs).
As already indicated, the company’s share price is down 16.2% over the past 12 months. The share price closed at $19.22 on June 26, 2017, which was the price’s highest level over the past 12 months. After peaking at the end of June 2017, the share price experienced some fluctuations but generally trended downward towards its 52-week low of $12.87, which it reached on March 2, 2018. However, the share price reversed direction and has risen 11.6% since its bottom in early March and closed on May 4, 2018, at $14.36. While that closing price is still 25% below the June 2017 peak, its nearly 40% higher than it was five years ago and 55% above its share price from January 2013.
The company started paying dividends in the second quarter of 2011 and has failed to raise its annual dividend payout only once, in 2013, when it paid the same $0.45 annual distribution as it did the year before. Since resuming dividend hikes in 2014, the company has enhanced its total annual dividend payout 60%, which converts to a dividend growth rate of nearly 10% per year. Over the last three years, the company’s annual dividend growth rate exceeds 14.5% per year.
The REIT’s current $0.18 quarterly distribution corresponds to a $0.72 annualized dividend and a forward dividend yield of 5%, which is more than 22% above the company’s own 4.1% average dividend yield over the past five years. In addition to exceeding its own five-year average yield, the company’s current yield outperforms the average industry yields as well. The current 5% dividend yield is 57% above the 3.2% average yield of the entire Financials sector, nearly 25% higher than the 4% average yield of all companies in the Real Estate Development market segment and still 3.6% higher than the 4.84% average dividend yield of the segment’s dividend-paying companies.
While the company’s share price decline left existing shareholders with a total loss of nearly 11% in the last 12 months, expanding the analysis time frame reveals more positive results. Over the past three years, shareholders enjoyed a total return of nearly 23%, and over the past five years the total return was more than 66%. In addition to the robust total returns over the longer periods, the company’s current Dividend Payout Ratio is 87%, which is low considering that REITs must distribute at least 90% of earnings as dividends. A dividend ratio at that level is a good indication that the company should be able to support its annual dividend hikes going forward or at least in the near term.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.