AINC - Why Income Investors Should Consider This Alternative to Major Hotels
Ashford Hospitality Trust (NYSE: AHT) is a real estate income trust (REIT) that invests in full-service upscale and upper-upscale hotels in the U.S. The company owns 199 hotel properties containing 25,087 rooms, 90 hotel condominium units at WorldQuest Resort in Orlando, and minority interests in hospitality asset management company Ashford (NYSEMKT: AINC) and hospitality mobile app OpenKey. Most of Ashford's properties operate under the Hilton (NYSE: HLT), Hyatt (NYSE: H), Marriott (NASDAQ: MAR), and InterContinental Hotel Group (NYSE: IHG) brands.
Shares of the REIT plunged from $5.60 in May 2019 to as low as $2.40 by July, primarily because the company slashed its quarterly dividend from $0.12 to $0.06 per share. Ashford's management indicated that the dividend reduction was implemented to strengthen the balance sheet and position the company to acquire assets strategically.
REITs must pass substantial amounts of profits to shareholders to remain in compliance with its tax status, so these securities generally pay higher dividends than stocks from other groups. The average dividend yield among REITs is currently between 5-6%, whereas the total market average yield is 2%. Ashford Hospitality Trust pays an 8.7% dividend yield, which is high even compared to other REITs. While the cash dividend was cut in half earlier this year, the price adjustment kept the yield high.