Is it Wise to Retain Host Hotels Stock in Your Portfolio Now?

Host Hotels & Resorts Inc. HST is poised to witness revenue per available room (RevPAR) growth from a solid portfolio of upscale hotels across lucrative markets. Also, a strategic capital-recycling program and healthy balance sheet augur well.

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However, macroeconomic uncertainty and a cautious approach by many businesses are likely to hurt demand for its properties in the near term. The elevated interest expenses add to its concerns.

Last December, Host Hotels’ board of directors announced a special dividend of 10 cents per share. This is in addition to a quarterly cash dividend of 20 cents per share.

Host Hotels has a strong Sunbelt exposure and presence in the top 21 U.S. markets. Its properties are advantageously located in central business districts of major cities with close proximity to airports and resort/conference destinations, thus driving demand. The improvement in group travel demand and business transient demand has aided occupancy and RevPAR growth over the past few quarters. The company is also experiencing continued strength in group business.

The company follows an aggressive capital-recycling strategy that entails the non-strategic dispositions of assets that have lower growth potential or properties with significant capital expenditure requirements and redeploying the proceeds for investments in better-yielding assets. It has prioritized projects in assets and markets that are anticipated to recover faster.

Per the company’s November 2024 Investor Presentation, from 2021 through the end of the third quarter of 2024, total dispositions amounted to $1.5 billion, 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength, and pave the way to capitalize on long-term growth opportunities.

Host Hotels has a healthy balance sheet and has been undertaking steps to fortify its balance sheet. As of Sept. 30, 2024, the company had $2.3 billion in total available liquidity. As of the same date, the weighted average maturity for its debt was 5.5 years and the weighted average interest rate was 4.8%. Further, as of the end of the third quarter of 2024, the company enjoyed investment-grade ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch, providing access to the debt market at favorable costs.

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Solid dividend payouts are the biggest attraction for REIT investors, and Host Hotels remained committed to that. Encouragingly, the company has increased its dividend eight times in the last five years and has a 41% payout ratio. Hence, with rebounding operating trends, a lower dividend payout ratio compared with the industry and a healthy financial position, we expect the latest dividend hike to be sustainable in the upcoming period.

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