Recent write-up on Motley Fool Nelson Smith | December 2, 2018
American Hotel REIT
I have a feeling many investors are going to be interested in American Hotel Income Properties REIT (TSX:HOT.UN), especially after they find out the stock yields an eye-popping 12.8%. No, that’s not a typo.
The current payout is US$0.054 per share each month, which translates into a little over $0.86 per share on a yearly basis in local Canadian currency. Shares trade hands at $6.64 currently on the Toronto Stock Exchange.
Many investors would take one look at that yield and declare American Hotel REIT a poor dividend investment, convinced the payout is about to be cut. But it’s not quite that simple. Over its last four quarters, the company generated US$0.74 per share in funds from operations while paying out US$0.64 in dividends. That gives it a payout ratio of approximately 90%. In other words, it can afford the dividend.
Even if it does slash the dividend in half to help pay down some debt, investors who get in today would still have a 6.4% yield. That’s hardly a disaster.
Other bullish signals include the company’s low price-to-funds from operations ratio (which currently sits below 7 times earnings) and its discount to book value. CEO Dennis O’Neill is also aggressively buying the stock today.