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Luxury hotel firm
Host Hotels & Resorts(HST) own more than 120 properties spread throughout the world. The firm is structured as a real estate investment trust, a setup that means that the company is obligated to pay out the vast majority of its income to shareholders in the form of dividends.
As a result, the firm announced a 20% dividend increase yesterday, bringing its payout to 6 cents -- that's a 1.56% yield.
It's good to think of REITs as income vehicles rather than real estate investment vehicles. Typically, landlord REITs enter into long-term triple-net leases that strip most of the market risk away from them and throw predictable income off to owners. That's not exactly the case with Host Hotels. Because the firm owns hotels itself, it's much more correlated with the economy than a typical landlord REIT would be.
Lately, that hasn't been a particularly good thing. While Host has made leaps and bounds at improving its financial situation following the crash, it still hasn't posted a fiscal profit since. Investors looking for REIT exposure should stick with the higher yields and lower risks of commercial landlord REITs first.
Host is one of the
top holdings at Ken Heebner's Capital Growth Management.
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-- Written by Jonas Elmerraji in Baltimore.