The Top 3 Hotel REITs: Discussed Comprehensively

Sep 02, 2022 By Triston Martin


Still, REITs (real estate investment trusts) generate almost twice as much money as the overall market. That's just the industry standard, too. There are now four productive REITs yielding 4% or more. In a second, we'll talk about the top 3 hotel REITs. Since REITs are similar to bonds, it is conventional wisdom that rising interest rates spell trouble for investors looking to purchase one. Wrong. Assuming that the economy continues to expand and these particular rents continue to be collected, dividends will continue to be distributed. Period. Here at Contrarian Outlook, we are dividend aficionados. According to S&P Global research, higher interest rates "are usually connected with economic growth and rising inflation," which is good news for the property market.

Host Hotels & Resorts

With 84 luxury and upper-upscale hotels (79 locations in the U.S. and five properties worldwide) and an estimated 47,600 rooms, S&P 500 firm and largest lodging, REIT Host Hotels & Resorts is a powerhouse in the hospitality industry. The corporation is publicly traded on the Nasdaq and has its headquarters in Bethesda, Maryland. On September 15, 2020, Host announced that 70 hotels were back in business. The company's usual quarterly dividend was scheduled to be paid in July 2020. Still, on June 19, 2020, the Board of Directors declared that it would temporarily suspend the dividend payments until further notice.

Sunstone Hotel Investors Inc.

The 18 hotels owned by Sunstone Hotel Investors Inc., a lodging REIT, are all in the upmarket to ultra-luxurious price range. It's estimated that this is the equivalent of 9,147 guest rooms. Marriott, Hilton, and Hyatt are just a few well-known hotel chains this corporation manages. Robert A. Alter established the company in 1985 and now has its headquarters in Aliso Viejo.

The company focuses on "long-term relevant real estate," and its assets are all situated in the gateway, convention, and resort regions across the United States. As a result, the company's portfolio is comprised mostly of high-quality real estate with favourable location, scarcity of substitutes, strong demand drivers, durability, fee simple ownership, and better economics regarding both capital expenses and owner profit. Sunstone thinks it will get better investment returns if it uses these criteria.

When hotel occupancy dropped to 6.7% in April, the firm decided to stop paying a dividend. Year-over-year revenue for the company dropped 95.9% in April 2020. The corporation's market value was $2.7 billion in October of 2021. The company has a P/E ratio of 310.

National Retail Properties (NNN)

The achievements of Realty Income are by no means exceptional. According to a study published by Raymond James in early July, net-lease REITs were already the best-performing real estate industry year to date, down only more than 6% compared to an 18% fall for the FTSE NARAR -2.6%EIT All Equity Index. I doubt it will come as a surprise to hear that another net-lease REIT, National Retail Properties (NNN), appears to be a model performer in its field. Although NNN is smaller than Realty Income, it still has a vast footprint, with 3,300 properties leased to 370 tenants across 48 states and an occupancy rate of 99% or above. Tenants like 7-Eleven, B.J.'s Wholesale, and Fikes account for less than 5 percent of the portfolio and are safe bets in the event of a global catastrophe.

Because of this, National Retail Properties's dividend has increased every year for the past three decades. That's on top of the recent 3.8% increase, which brought quarterly dividends to 55 cents. The company intends to build on a solid first quarter that saw AFFO per share increase by 4% to 79 cents per share, which will be reflected in upcoming Q2 earnings. Meanwhile, AFFO for the full year is expected to grow by over 6%, according to research by Raymond James. Solidity on display, coupled with a yield of 4% or more, should continue to attract buyers for the rest of the year, even if the market shakiness returns.

Apple Hospitality REIT

There are 215 hotels under Apple Hospitality REIT's control, spread out throughout 35 states in the United States. This equates to roughly 28,100 sleeping quarters at hotels across the United States. Marriott, Hilton, Hyatt, and two others of varying independence are among its hotels. The portfolio is mostly concerned with lodging. Therefore guests should expect basic accommodations rather than luxurious amenities. Apple Hospitality's share price has dropped by -33.32% this year. On August 5, 2021, Apple Hospitality released its quarterly earnings reports. The REIT's EPS for the second quarter of 2021 was $0.30.


I think H.T. has all the merits of a first-rate REIT, yet the market treats it as though it faces serious difficulties. Portfolio returns are above average, management is among the finest, insiders are purchasing shares, and the balance sheet is healthy. Still, for some reason, I can't fathom the stock trades at a discount.

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