Summary
- Fresh off of 52-week lows and yielding nearly 7.5%, Chatham Lodging Trust is a victim of market sentiment.
- Dividend is easily covered and has grown modestly over the years with more room to increase.
- Industry-leading EBITDA and margins along with a 94% of debt being at fixed rates provides.
Introduction
Chatham Lodging Trust (CLDT) owns 41 properties in the United States, focusing on select service hotels and extended stay properties in coastal markets and as a result, the majority of properties are located on the East and West coasts. Additionally, CLDT has a joint venture with Colony NorthStar (CLNS), which is a 10.3% non-controlling interest and was utilized to acquire 47 hotels from a prior joint venture between CLDT and Cerberus Capital Management. CLDT also has a second joint venture with CLNS which is a 10% non-controlling interest and was used as a means to acquire 48 hotels from Inland American Real Estate Trust Inc.
Thesis
In 2018, CLDT shares declined over 22% due to fears of rising rates and most recently, CLDT hit a 52 week low of $17.29 and at the time of this writing, is trading around $17.60 which translates to a yield of nearly 7.5%. This yield is sizable, safe, could continue to see growth, and offers income investors a meaningful return to hold the stock. CLDT is a leader in its industry and has RevPAR levels above its peers and other lodging REITs thanks to its efficient operations model and favorable debt structure.
