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We think DiamondRock Hospitality Company's (NYSE:DRH) CEO May Struggle To See Much Of A Pay Rise This Year

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·4 min read
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The share price of DiamondRock Hospitality Company (NYSE:DRH) has struggled to grow by much over the last few years and probably has to do with the fact that earnings growth has gone backwards. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 05 May 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for DiamondRock Hospitality

How Does Total Compensation For Mark Brugger Compare With Other Companies In The Industry?

According to our data, DiamondRock Hospitality Company has a market capitalization of US$2.2b, and paid its CEO total annual compensation worth US$4.7m over the year to December 2020. That's slightly lower by 4.1% over the previous year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$775k.

On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$4.2m. So it looks like DiamondRock Hospitality compensates Mark Brugger in line with the median for the industry. Moreover, Mark Brugger also holds US$17m worth of DiamondRock Hospitality stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2020

2019

Proportion (2020)

Salary

US$775k

US$775k

17%

Other

US$3.9m

US$4.1m

83%

Total Compensation

US$4.7m

US$4.9m

100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. It's interesting to note that DiamondRock Hospitality pays out a greater portion of remuneration through salary, compared to the industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

DiamondRock Hospitality Company's Growth

DiamondRock Hospitality's funds from operations (FFO) took a hit this year, falling to -US$110m from US$302m last year. In the last year, its revenue is down 68%.

Its a bit disappointing to see that the company has failed to grow its . And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has DiamondRock Hospitality Company Been A Good Investment?

DiamondRock Hospitality Company has generated a total shareholder return of 3.3% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for DiamondRock Hospitality (of which 1 shouldn't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Important note: DiamondRock Hospitality is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.