"In bear markets, a traditional safe haven for investors has been to seek out stocks with high dividend yields and ideally the potential for share-price appreciation," notes Bill Martin.
In his exceptional trading and investing service, BullMarket.com, he notes, "One of our favorites for income is Hospitality Properties Trust (NYSE: HPT), a real estate investment trust, which offers an 8.5% yield.
"Hospitality Properties Trust invests in hotels and travel centers, the latter being otherwise known as truck stops. If it doesn't sound very glamorous, this REIT nonetheless currently pays a $3.08 a share annual dividend, good for a pre-tax 8.5% yield with the stock trading in the mid-$30s range.
"It buys hotels principally for income and secondarily for appreciation potential. All of its properties are run under long-term combination agreements that usually require the operators to pay the company minimum returns or rent plus a share of the increased cash flows realized over time.
"It doesn't favor any one hotel brand, operating under such names as Hyatt Place, Spring Hill Suites, Marriott Residence Inn, Radisson, Staybridge Suites, Crowne Plaza, and Courtyard hotels.
"The key metric in any REIT is funds from operations (FFO), which reflects the ability of the REIT to pay dividends and fund additional acquisitions and property improvements.
"Also, because HPT is focused on the hotel business, management also closely monitors revenue per available room, or RevPAR, as a measure of the performance of both individual properties and its portfolio collectively. The more rooms that are filled on a given night, the more RevPAR a property produces.
"The company announced its year-end results in February. It generated Q4 FFO per share of $1.15, or approximately 15% better than the year-ago quarter and topped the consensus estimate of $1.11. RevPAR for HPT's 292 hotels increased 6.2% for the quarter.
"CEO John Murray conceded that the worsening economy and the upheaval in the capital markets will be a challenge for the firm this year. The big cloud facing HPT's business is clearly the economy and gasoline prices. A slowdown that crimps hotel occupancy and domestic travel will cut into RevPAR
"And its travel center business, not surprisingly, has struggled as the collapse of the home construction market, weakened auto production, escalating gasoline prices, and a general slowdown in economic activity has hit the trucking industry hard. The company's 185 truck stops are all operated by TravelCenters of America (NYSE: TA).
"The company's steady level of guarantee payments stabilizes cash flows is an attractive feature of its business model. HPT has had a long track record of stable performance and its current yield hasn't been this generous since 2003.
"The stock bottomed out at $29.50 in January, but has slowly been rebounding since then. Still -20% below its 52-week high of $47.88 reached a year ago, HPT's shares have a lot of upside when the economy starts to emerge from its current doldrums. HPT remains our overall favorite in the group."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
4-10-2008 @ 12:23PM
Emma695 said...
With 40% of HPT's revenue coming from the truckstop business I would think that there is more downside than upside. The TA operation reported losses of over $120 million and is halting capex and laying off employees. Looks like a restructuring candidate and this won't help HPT.
http://www.costar.com/News/Article.aspx?id=6F81B7D8C0DAB6BADFF9E8766CA75608
4-13-2008 @ 2:11AM
Bruce Forsberg said...
A better play for HPT would be to buy their preferred stock. HPT-B is currently trading 23.0 - 23.5 and has already reached its callable date. If and when HPT calls this stock owners will get $25 per share. In the mean time they get a 9.3% dividend that is more protected then the common stock is.