Could Marriott’s Dividends Rise in the Second Half of 2016?
Long-time dividend payer
Marriott has been paying investors dividends for the past 16 years. Most of its rivals have a very short history of dividend payments.
InterContinental Hotel Group (IHG) has been paying dividends since 2003. But Wyndham Worldwide (WYN) didn’t start paying dividends until 2007. Hilton Worldwide Holdings (HLT) began paying dividends in 2015, and Hyatt Hotels (H) doesn’t pay dividends at all.
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Marriott’s dividend yield
Marriott has an indicated dividend yield of 1.6%. That’s the lowest among its peers. Wyndham has an indicated dividend yield of 2.6%, followed by InterContinental at 2.1% and Hilton at 1.4%.
Cash dividend ratio
Marriott’s cash dividend ratio was 3.0x at the end of 3Q16, which indicates its ability to sustain dividend payouts. The ratio is calculated as income before extraordinary items minus minority and preferred dividends over dividends paid. It measures the ability of the company to pay dividends. A ratio less than 1.0x indicates that dividend payouts are higher than the company’s cash flows, which may be difficult to sustain in the future.
Could dividends rise?
Marriott has a history of increasing dividend payouts every four quarters. The last time it increased its dividend was in 1Q16. So perhaps we should expect a rise in 1Q17. Marriott’s strong free cash flow further reinforces a possible dividend increase.
You can gain exposure to Marriott by investing in the iShares Russell Mid-Cap Growth (IWP), which invests 0.74% in Marriott.