Long-time dividend payer
Marriott (MAR) has been paying dividends for the past 16 years. On the other hand, its rivals (except IHG) have a very short history of dividend payments. InterContinental Hotel Group (IHG) has a history of paying dividends since 2003.
Cash dividend ratio
MAR’s cash dividend ratio stood at 3x at the end of 4Q16, indicating its ability to sustain dividend payouts. This 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 that is lower than 1 could point to dividend payouts higher than the company’s cash flows, which may be difficult to sustain in the future.
Can dividend payouts increase?
During its March 21, 2017, investor day, Marriott noted that it could expect a 30% payout ratio for the next three years. This forecast means that $1.4 billion–$1.5 billion could be returned to shareholders as dividends. Accordingly, Marriott has declared a dividend of $0.30 in 1Q17. Marriott management has noted that investors can expect another $6.9 billion–$7.8 billion through share repurchases in the next three years.
Investors can gain exposure to Marriott by investing in the iShares US Consumer Services ETF (IYC), which holds 0.96% of its portfolio in Marriott.