NEW YORK (AP) -- Shares of Choice Hotels International Inc. hit their highest point in almost 5 years on Wednesday as investors cheered the company's plan to pay a special dividend of nearly $10 per share and an analyst upgraded the stock.
THE SPARK: The Silver Spring, Md., company said late Tuesday it planned to sell notes to help pay about $600 million to shareholders through the special dividend. It has about 57.5 million shares outstanding. Choice shares on Wednesday were among the biggest gainers on the New York Stock Exchange.
THE ANALYSIS: RW Baird analyst David Loeb lifted the stock to "Neutral" from "Underperform" and raised his price target to $38 from $36, saying the move highlights Choice's stable supply of cash. He says the risk of shares losing ground in the near future is low.
But Standard & Poor's cut the hotel company's corporate debt rating to junk status Wednesday, and said it expects to further downgrade the ratings once the note sale is complete. S&P said the move to pay the huge dividend signals management's willingness to spend more than it had previously stated, increasing its leverage and financial risk.
SHARE ACTION: The stock rose $2.75, or 7.2 percent, to $40.99 in afternoon trading after earlier hitting a high of $42.24. Shares haven't past that point since October 2007.