Host Hotels & Resorts, Inc. HST announced a temporary suspension of the quarterly cash dividend, starting with the June-end quarter dividend that would have been paid out in July 2020.
The company anticipates this to preserve around $140 million of cash during the April-June period.
Earlier, it paid out a dividend of 20 cents per share on Apr 15 to stockholders of record s of Mar 31, 2020.
Per management, the decision to suspend the quarterly dividend comes as a measure to preserve liquidity and maintain balance sheet flexibility. Nonetheless, the board will continue to keep an eye on the company’s financial performance and operating scenario to decide the correct time to restart dividend payments.
Notably, it has been making efforts to improve its liquidity to navigate the impact of business challenges posed by the pandemic. In fact, during the first quarter, it drew down the entire $1.5-billion capacity on its revolver in a bid to boost the cash position. Additional measures to improve liquidity included reductions in corporate expenses by 10-15%, capital expenditure reduction by $100-$125 million and temporary suspension of future stock repurchases.
Further, with a $2.6-billion cash position as of May 31, the company has sufficient liquidity to withstand a complete shutdown of its entire portfolio until 2021 end. Therefore, the financial flexibility provides it ample scope for deploying capital for long-term growth opportunities and at the same time, carrying out redevelopment initiatives.
In fact, Host Hotels undertakes a strategic capital-recycling program to improve its portfolio quality and strengthen its position in the United States, where it has a greater scale and competitive advantage.
Since 2018 through Jun 1, 2020 the company acquired high-quality properties worth $1.6 billion, which have scope for long-term growth. Furthermore, it has been making strategic non-core asset dispositions, aiming at lowering its international and New York exposure. With the proceeds, it has the flexibility to add premium properties to its portfolio and invest in existing assets.
Additionally, the company projects capital expenditure of $450-$525 million for the year. This includes $290-$340 million in return on investment (ROI) projects, and $160-$185 million in renewal and replacement projects. Such investments are likely to help the company improve its portfolio quality and bolster revenues.
However, the rampant coronavirus outbreak has weakened the travel demand. Notably, the COVID-19 outbreak-related restrictions on travel resulted in a sharp decline in group, business and leisure travel. Moreover, delays or cancellation of conventions and conferences and other large public gatherings, which are typically demand-drivers at the company’s hotels, resulted in 24.3% and 21% declines in first-quarter revenues and total RevPAR.
Additionally, since restrictions on travel were primarily implemented in mid-March, the company expects the adverse impacts to continue in the second quarter. In fact, it anticipates 20 hotels, representing 22% of room count, to remain suspended as of Jun 30, 2020.
Moreover, shares of this Zacks Rank #3 (Hold) company have plunged 34.7% over the past year compared with the industry’s loss of 7.2%.
Stocks to Consider
Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has been unchanged at 83 cents over the past month. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
City Office REIT, Inc.’s CIO FFO per share estimate for the ongoing year has been unchanged at $1.11 over the past 30 days. The company currently sports a Zacks Rank of 1.
Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has been unchanged at 68 cents over the past month. It currently carries a Zacks Rank of 2 (Buy).
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Host Hotels Resorts, Inc. (HST) : Free Stock Analysis Report
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