Investors who want to cash in on DiamondRock Hospitality Company’s (NYSE:DRH) upcoming dividend of US$0.13 per share have only 2 days left to buy the shares before its ex-dividend date, 28 June 2018, in time for dividends payable on the 12 July 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding DiamondRock Hospitality can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes. Check out our latest analysis for DiamondRock Hospitality
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does DiamondRock Hospitality fare?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. The current trailing twelve-month payout ratio for DRH is 115.03%, meaning that a portion of dividend payments are funded by retained earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from DiamondRock Hospitality fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, DiamondRock Hospitality produces a yield of 4.05%, which is on the low-side for REITs stocks.
Now you know to keep in mind the reason why investors should be careful investing in DiamondRock Hospitality for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for DRH’s future growth? Take a look at our free research report of analyst consensus for DRH’s outlook.
- Valuation: What is DRH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DRH is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.