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The timeshare market is heating back up right now. Just ask
Wyndham Worldwide(WYN - Get Report), the world's largest timeshare and hotel operator. Shares of the $8 billion stock have rallied more than 39% in the last 12 months, easily overshadowing the firm's modest 1.65% dividend yield. But that dividend shouldn't be ignored long-term. For investors who bought back when WYN was at its worst in 2009, the stock's cost yield works out to around 25% annually.
Selling timeshares is lucrative when times are good. Customers buy into properties, paying out substantial purchase costs as well as annual maintenance fees. Because of the huge sunk cost involved, Wyndham's revenue is stickier than anything a traditional hotel could expect to earn -- and it comes with deeper margins too. The downside to that business is that it completely dries up when times turn less good. WYN's ability to weather the last financial storm is a good indicator that management can cope with serious economic headwinds, even in this hugely capital-intense business.
Wyndham has been pretty consistent about boosting its dividend payouts, so with four quarters of its 23-cent dividend now behind it, a boost looks likely for 2013. Keep an eye on the firm's earnings call next week.
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-- Written by Jonas Elmerraji in Baltimore.