About three or so years ago I panicked when EOP (Equity Office Propety reit) drastically cut their dividend by more than half to improve their debt equity situation. At that announcement of a cut, I sold my holdings in EOP at a loss and during the first couple days after the announcement the stock went down. FCH is pretty much in a similar situation. EOP at the time was the largest Office Reit. (it's been taken private since then) Within the next month or so after the dividend cut, EOP stock was trading 30% higher and I kicked myself for having sold. FCH seems to have good metrics and even showed us that July revpar was holding up well. I'm hanging with them this time. I think the annual loss of 80 cents in dividend will be recovered in a more than 80 cents increase in share price within a month from today's price. JMHO
The lower dividend announcement combined with a reasonable conservative forecast is resulting in a higher share price for FCH. This has been my experience in equity reit holdings that I have had in past years. I am long and never short. I have held many reits over the period 2001 forward and sometimes they cut dividends. My experience (maybe you have a different one) is that dividend cuts quickly improve the share price after the initial shock period. (I'm talking equity reits not mortgage reits) Sure FCH dropped like a stone the day after reporting a dividend cut. But over time, this strategy will reward long term holders. I do not think this is a dead cat bounce. We'll see.
When a dividend gets cut or eliminated, I will be there to start looking to buy. In a few days the dust will settle and FCH will be settling down to a lower trading range that likely represents a fantastic value.
I agree with your statements, and infact with todays price drop the current yield is still pretty good. Also operating results were fine, this is an undervalued investment that will pay you a yield of 2x that of treasuries. I have put a nice trade on today, and if I get ahead of the curve I will hold the position longer term. JMHO
You are comparing apples and oranges. EOP was in play after the div cut, FCH is not now or will be in the forseable future, in play. Real estate and high end discrecionary spending is dead. Revisit it in 3 years. If FCH regains $.80 in price anytime soon, I'll treat your wife to an overnight stay at one of their hotels.
I read the Lehman report (updated today), Value Line report and S&P report over again and doubled down although I had just bought in at a pretty low price not long ago. Now if they had eliminated the dividend, my story might be different. REITs are in general all great buys right now from what I read.
The problem is that mgt continually dilutes earnings by giving themselves tons of free stock. They also overpay themselves in spite of very poor performance. They use the company as their personal piggie bank. New and honest mgt would do wonders for this stock. The best we can hope for is a hostile takeover. They will never give up their piggy bank without a fight.