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Dividend Hike at Host Hotels

Zacks Equity Research

Host Hotels & Resorts Inc. (HST) – a lodging real estate investment trust (:REIT) – announced a 9.1% sequential hike in its quarterly cash dividend rate. The company will now pay a dividend of 12 cents per share compared with 11 cents paid in the prior quarter. The increased dividend will be paid on Oct 15, 2013 to stockholders of record on Sep 30, 2013.
Host Hotels has a strong balance sheet, which provides the financial flexibility to aim at high-yielding acquisitions, high ROI (return on investments) capital projects, steady dividend payouts and share buybacks.

The company is making a concerted effort toward increasing shareholders’ wealth and accordingly, it has hiked its dividend payout for the 11th  consecutive time. Notably, a steady dividend payout facilitates the long-term strategy of Host Hotels to provide attractive risk-adjusted returns to its stockholders.

Aided by significant comparable properties’ performance, this leading lodging REIT reported second-quarter 2013 adjusted funds from operations (:FFO) per share of 45 cents, exceeding the year-ago figure by 36.4% and the Zacks Consensus Estimate by 7.1%. Including certain non-recurring items, FFO was 39 cents per share, up 25.8% year over year.
Host Hotels operates luxury and upper-upscale hotels across hard-to-replicate areas, which have the potential for significant capital appreciation. Moreover, with strong quarterly results, the company is well poised to maintain its growth curves and simultaneously benefit the shareholders with steadily rising dividends.

As a matter of fact, two other REIT firms have increased their dividend payouts recently. Alexandria Real Estate Equities Inc. (ARE) announced a 5% hike in its quarterly cash dividend rate, reflecting a dividend increase for the sixth consecutive quarter. This REIT will now pay a dividend of 68 cents per share for third-quarter 2013, up 3 cents from the prior-quarter dividend.

The other REIT - EastGroup Properties Inc. (EGP) – also announced a hike in its quarterly cash dividend sequentially by 1.9% to 54 cents per share from 53 cents. The new dividend will be paid on Sep 30, 2013 to shareholders of record as of Sep 19, 2013. Notably, EastGroup has raised or maintained its dividend for 21 consecutive years and hiked it for 18 years within this period.
Solid dividend payouts are arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.

Host Hotels currently carries a Zacks Rank #3 (Hold). Another REIT that is performing well and deserves a look is Sotherly Hotels Inc. (SOHO), which carries a Zacks Rank #1 ( Strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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