A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Sotherly Hotels Inc (NASDAQ:SOHO) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Does Sotherly Hotels tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Sotherly Hotels
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How does Sotherly Hotels fare?
The current payout ratio for SOHO is negative, which means that it is loss-making, and paying its dividend from its retained earnings. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Sotherly Hotels fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Relative to peers, Sotherly Hotels generates a yield of 6.65%, which is high for REITs stocks.
Now you know to keep in mind the reason why investors should be careful investing in Sotherly Hotels for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SOHO’s future growth? Take a look at our free research report of analyst consensus for SOHO’s outlook.
- Valuation: What is SOHO 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 SOHO 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.