Despite recent mixed signals, which were probably weather related,
most analysts expect the economy to gain strength as the year
If that happens, the hotel business, already picking up, should do
even better. This might be a good time to get in
on the action.
Owners vs. Managers
When talking hotels, there are two types of stocks to
consider; property owners and property managers. Hotel property
owners maintain the buildings, periodically refurbishing and
upgrading the facilities. The owners typically hire management firms
with strong brand recognition such as Marriot or Westin to operate
their hotels. The owner receives a base rent and a percentage of the
Property Owners Pay Higher Dividends
It was almost two years ago when I last wrote about hotel
stocks, July 29, 2012, to be specific. In that column, I focused on
hotel property owners because many of those are real estate
investment trusts (REITs), which, as a group, pay higher dividends
than regular stocks. I like high-dividend stocks because you get
paid to own them, even if the share price goes nowhere.
REITs trade like regular stocks, but they don’t pay federal
corporate taxes as long as they pay out at least 90 percent of
taxable income as dividends. However, their dividends are taxed at
regular rates—the 15/20 percent maximums don’t apply.
The three REITs turned up by my July 2012 screen averaged a
50 percent return over the first 12-months and 81 percent from
August 2, 2012 through Wednesday, April 30, 2014. Given that track
record, I used the same screen to pick candidates for today’s
It uses the free stock screener (program to find stocks
meeting your requirements) provided by
FINVIZ.com. Here’s how you
can run the screen yourself.
Start by selecting
Screener on the FINVIZ homepage (finviz.com).
FINVIZ calls its stock selection rules “filters.” On the Filters
bar, select “All” to display all of the available filters. Then use
the associated dropdown menus to setup your filter values.
In the USA
Limit your search to lodging REITs by clicking on the
Industry filter (top row) and then scrolling down until you see
“REIT – Hotel/Motel.” Then use the Country filter and select “USA”
to rule out foreign stocks.
Use the Dividend Yield filter and select “Over 3%” to limit
your results to REITs paying at least three percent yields. Yield is
analogous to the interest that you receive on a savings account,
except that your principal is not insured by the U.S. government.
Dividend yield is the next 12-months dividends that you receive
divided by the price you paid for the shares. So, your yield would
be 10 percent if you pay $10 per share and receive $1 of dividends
over the next 12-months.
Although not fast growers compared to tech stocks, you’ll do best by
limiting your list to relatively fast growers in terms of revenues.
Use the Sales Growth (quarter over quarter) filter and specify “Over
Smart Money In?
Big players such as mutual funds have access to information that
we’ll never see. If they aren’t buying, you shouldn’t either. Use
the Institutional Ownership (percentage of shares held by
institutional buyers) filter and specify “over 40%.”
FINVIZ sorts stock analyst buy/sell ratings into these categories:
strong buy, buy, hold, sell, and strong sell. Reduce your risk by
sticking with stocks that the analysts like. Use the Analyst
Recommendation filter to specify “Buy or better.”
Stocks that have been moving up in price tend to continue their
winning ways and vice versa. Require that passing stocks have
recently moved up, not down. Use the Performance filter to specify
“year-to-date (YTD) up.”
My screen turned up four hotel REITs.
link to the screen so you can see which stocks it's turning up
Chesapeake Lodging Trust (CHSP): A repeat from last time,
Chesapeake owns 20 mostly upscale hotels. Dividend yield 4.5
Chatham Lodging Trust (CLDT): Owns interests in 77 upscale
extended-stay hotels. Yield 4.8 percent.
Hersha Hospitality Trust (HT): Owns 51 upscale hotels in
major cities such as New York and Washington DC. Yield 4.2 percent.
RLJ Lodging Trust (RLJ): Another repeat from last time, owns
146 mid-priced limited service hotels such as Courtyard by Marriot
and Embassy Suites. Yield 3.3 percent.
As always, consider these four REITS to be research candidates, not
a buy list. The more you know about your stocks, the better your