Hilton (HLT) started paying dividends in mid-2015. On the other hand, rivals Marriott (MAR) and Intercontinental Hotel Group (IHG) have a long history of paying dividends. Rival Wyndham (WYN) has been paying dividends since 2007. Hyatt (H) doesn’t pay dividends at all.
Hilton has an indicated dividend yield of 1.0%, which is the lowest among peers. Wyndham has an indicated dividend yield of 2.6%, followed by Intercontinental (IHG) with an indicated dividend yield of 2.1% and Marriott with an indicated dividend yield of 1.6%.
Cash dividend ratio
Hilton’s cash dividend ratio stood at 1.2x at the end of 2016, indicating its ability to just about sustain dividend payouts. The ratio is calculated as income before extraordinary items minus minority and preferred dividends over dividends paid. This ratio measures the ability of the company to pay dividends. A ratio of less than one indicates a dividend payouts ratio higher than the company’s cash flows, which may be difficult to sustain in the future.
Will dividend payouts increase?
Between mid-2015 and the end of 2016, Hilton maintained its dividend payout at $0.07 per quarter or $0.28 annually. The company increased the payout to $0.15 per quarter in the first quarter of 2017. Investors can thus expect dividends to remain at this rate for the rest of 2017.
Hilton is a part of the First Trust US IPO ETF (FPX), an ETF that invests in the technology, automobile, hotel, and financial sectors. It invests ~1.8% of its holdings in Hilton stock.