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Starwood Hotels & Resorts(HOT - Get Report) is the firm behind brands like Sheraton, St. Regis, Aloft and Westin. The firm is also another prime candidate for a dividend hike -- Starwood currently pays out an annual dividend of 50-cents, a payout that the firm has managed to increase every year since its inception.
With the firm's financials finally starting to catch up with investors' hopes, HOT should be good for an even bigger bump this year.
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Starwood doesn't own all of its hotels. Instead, only around 5% of properties show up on HOT's balance sheet. The rest are merely managed by the firm on behalf of owners, a setup that takes the most substantial risks (like maintenance and real estate values) off of HOT's balance sheet. That service-driven (rather than capital-driven) strategy means that the firm earns consistent and recurring revenues with extremely high switching costs. After all, a St. Regis can't easily or cheaply switch brands if its owners have a dispute with Starwood. That's a good mark for an aspiring dividend stock.
While Starwood's yield is relatively small at just under 1%, the firm has also been working hard to make its service revenues more material. Currently the firm's owned properties make up most of its operating income. Wherever their source, earnings are currently more than strong enough to support a bigger dividend payout next year.