Have you been keeping an eye on DiamondRock Hospitality Company’s (NYSE:DRH) upcoming dividend of $0.13 per share payable on the 12 April 2018? Then you only have 3 days left before the stock starts trading ex-dividend on the 28 March 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
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is it able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
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 company currently pays out 109.27% of its earnings as a dividend, according to its trailing twelve-month data, meaning that a portion of dividend payments are funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 94.33%, leading to a dividend yield of around 4.80%. EPS is also forecasted to fall to $0.46 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from DiamondRock Hospitality have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, DiamondRock Hospitality produces a yield of 4.86%, which is high for REITs stocks.
If DiamondRock Hospitality is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent aspects you should further research:
- 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.