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February 8, 2017 | Host Hotels & Resorts Inc. | HST


Today’s Stock of the Week is a way to invest in luxury hotels and resorts as well as the improving US economy.

Hotel Holdings

Host Hotels & Resorts Inc. (HST) pays investors a high dividend and is an attractive way to invest in higher-end hotel and resort properties that should do well as the economy improves.

Known as Host Marriott Corporation until 2006, the real estate investment trust (REIT) owns—but does not manage—hotels under the Marriott, Ritz-Carlton, Westin, Hilton and Hyatt brands in the US, Canada, Mexico and Europe. The hotels are managed by various hotel-management companies rather than by Host. The company’s management is disciplined…cost control is very good…and room rates at owned properties average a very high $220/night.

Like all REITs, Host pays out at least 90% of earnings to shareholders as dividends. REITs tend to suffer when interest rates rise because their dividends become less attractive to investors, but Host’s size helps it negotiate favorable loan rates, and it buys properties for cash as often as possible. Host also has been selling its lower-performing properties and likely will continue doing so. Revenue was $5.4 billion in 2015 and likely will be reported as $5.74 billion for 2016 and $6 billion for 2017. The dividend of $1/share/yr., recently yielding 5.6%, appears secure.

Fiscal yr.: December. Earnings per share: 2017 est./$0.66… 2016 est./$0.96… 2015/$0.74.

This Week’s Expert

Jack Newell is chairman and CEO, Dover Partners, Inc., Dayton, Ohio, which manages $100 million.

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