FelCor: Stepping Back To Move Forward

fch interest coverage  FelCor Lodging Trust, Inc. (NYSE:FCH), a lodging REIT that owns 46 upper-upscale and luxury hotels throughout the country, has experienced greater operational growth rates than its peers. Although the company doubled its dividends late in 2014, this performance contrasts with its 1.5 percent dividend yield and its 29 percent dividend payout. For that reason, we are examining FCH under a magnifying glass.

FelCor has been through ups and downs during its history, the most recent down being during the Great Recession. This led the company to negative FFO in 2010 and zero dividend distributions. Since then, FelCor has been very conservative, disposing of a significant number of its properties (In fact, 38 properties). They only resumed paying dividends in 2014.fch metrics

More recently, in Q1 2015 vs. Q1 2014, same-store hotel EBITDA increased 31 percent. In addition, hotel EBITDA margins advanced 376 points to 26.9 percent. FelCor also displayed one of the highest RevPAR growths, which was 13.5 percent.

Even after the reduction, the portfolio continues diversified in terms of location, geography and brands. They have properties in California, Texas, Florida and the East Coast and they are located in airport, suburban and urban areas, and in resorts. Most of the hotels are under Embassy Suites, but some are managed by other brands.fch portfolio

The only caveat is FelCor’s debt profile, which is higher than those of its peers; on the other hand, leverage has decreased and debt-to-capitalization is currently below 50 percent. Price-to-FFO has been in line with the sector median. Dividend yield at 1.5 is well below the 4 percent median. FelCor is a rapidly-growing company with a fair entry point but low dividend yield.

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Source: FelCor Lodging Trust, Fast Graphs

Written by Heli Brecailo

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