Go to a Hotel for Dividends. APLE

We were looking for another monthly dividend company.  An apple a day keeps the doctor away. Instead, how about a dividend a month keeps our passive income happy.  Isn’t getting a dividend payment every month awesome? When you go to a hotel for dividends, which do you choice?

Apples

Background

Apple Hospitality (APLE) is a REIT (real estate investment trust). They own the largest selection of upscale select service hotels in the US.  With 179 hotels, they have about 23,000 rooms in 32 states.  They are in mainly the Hilton and Marriott brand names.  Their locations consist of high-end suburban and developing markets.  They focus on the acquisition and ownership of income-producing real estate.  They were founded on November 9, 2007 and they are based in Richmond, Virginia.

Valuation

The best part of the valuation is the 6.4% dividend yield.  The PE is 29, but the price to cash flow is only 12.4.  So the PE is high, but the price to cash flow is not bad.  Their PS (price to sales) is 3.7, which is high for a lot of companies.  However, a lot of REITs have higher PS ratios. Their dividend payment is 79% of cash flow.  We generally like a lower payout ratio, but with REIT’s being required to payout 90% of earnings, we are happy to accept this. If we didn’t, then why did we buy shares.  (O-wait, we do not mention that till later in the post.  Shhhh, don’t tell anyone yet.)


Future

The current company is from a merger in 2014 between 3 similarly named companies: Apple REIT 7, Apple REIT 8, and Apple REIT 9.  The company has 179 properties.  They are adding hotels such as the $60 million Marriott in Burbank, CA and several more.  We only need to add about 2 hotels a year for 1% growth.  It looks like they have added at least 5 in 2015.  So we are glad to see them growing. They are also merging with Apple REIT 10.  (Who named these companies? Is there an 11?)  It looks like there is over 53,000 hotels in the US. This makes their share of hotels at only 0.3%, which is a small percentage.  If they get up to 1% of hotels, they will triple in size with 530 hotels.  On top of that, if the hotel industry keeps growing, this will allow Apple Hospitality (APLE) to keep growing.

Hotel for Dividends

They only started paying a dividend in 2015, so they have a small payment history.  They pay a dividend every month.  Being that we are at the 12 month of $0.10 per month, hopefully we will get a raise next month before we even get our 1st dividend payment.  Starting out at a 6.4% dividend yield is not a bad start.  If we get lucky with a 1 penny raise, we will get a 7% yield.  But we are happy with the 6.4% yield.

What I bought

So we bought Apple Hospitality (APLE) for $290.29 including those commissions that help pay for hotel stays for business meetings.  We are going to start collecting $18 a year in dividends.  Although, if they keep growing, this could become a dividend powerhouse.  What hotels do you sleep at for dividends?

Do you like to go to a hotel for dividends?  Do you think Apple Hospitality (APLE) is the best REIT hotel stock?  Please feel free to join in below.

You can review more stock purchases here.

Discloser: Long APLE

 

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