U.S. REITs – Which Ashford Hospitality is Better? (Part 1/2)

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If you had to choose between two REITs in the hospitality sector–Ashford Hospitality Prime (NYSE:AHP) and Ashford Hospitality Trust (NYSE:AHT)–you would come to realize that one is doing better than the other. Ashford Prime completed a spin-off from Ashford Trust in November, 2013, and invests in luxury hotels in gateway and resort locations. Ashford Trust, on the other hand, being more open-targeted, invests across various segments in the hospitality sector.

chart03The entanglement of these two companies gets our attention. Both of them are externally advised by Ashford, Inc., another publicly-traded company (NYSE MKT: AINC). Even though externally managed, the Ashfords like to highlight their high insider-ownership percentage in comparison to their peers. Insider ownership for Ashford Prime is 14 percent and is 16 percent for Ashford Trust–their peer average is 2 percent. It’s clear then, if you choose to invest in an Ashford REIT, you must be comfortable with the idea of external management.

The highest total-debt to total-capitalization ratios in the hospitality sector are shared by these two companies–Prime at 56 percent and Trust at 72 percent–with the peer median at 33 percent. The third highest ratio behind the Ashfords is FelCor Lodging Trust (NYSE:FCH) at 47 percent. Prime and Trust both have sizable amounts of cash, which softens the high relative leverage.

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Dividend histories for both companies reflect down sides. It is difficult to conclude anything from Ashford Prime’s eight quarter dividend history since it so recently became a publicly traded company. However, if you look at the history of the original company, Ashford Trust, it has distributed dividends since 2004. There were three years, though, from 2008-2011, when dividends were not distributed. Even so, they made regular attempts at raising dividends. The hospitality sector dividend yield is 4.8 percent–Ashford Prime is trading at 2.6 percent dividend yield and Ashford Trust is at 6.8 percent.

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To be continued…

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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