I’ll confess to you that one of my favorite monthly paying REITs is Chatham Lodging (NYSE:CLDT). While the Palm Beach-based Lodging REIT can’t really compare to my classic (monthly) payer, Realty Income (NYSE:O), both REITs are considered top performers within their respective property sectors.
I have been researching Chatham for around two years, and around six months ago, I initiated a purchase at around $26.00 per share. Last week, I attended an Investor Presentation at REIT Week and I had an opportunity to meet with Chatham’s CEO, Jeffrey H. Fisher.
This was my first face-to-face meeting with Chatham management and I was able to dig-deeper into the business model in search of my quest for dividend sustainability. Since going public on April 16, 2010 Chatham has become an exceptionally profitable REIT – increasing adjusted funds from operations (or AFFO) by an average of 28% between 2011 and 2015 (estimated).
To put that into perspective, Chatham’s AFFO per share CAGR is 3rd best in the lodging peer group:
Obviously, my attraction with Chatham is the consistency of profit margins that have resulted in steady and growing dividends. In January, Chatham announced a 25% dividend increase that resulted in an annualized dividend payout of $1.20 per share.
I’m not the only one chatting good things about Chatham. Mr. Market has also become attracted to the essence of Chatham’s sources of differentiation. Since the company’s IPO, the company has generated total shareholder returns of around 70%.
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Over the last 12 months, Summit Hotel Properties (NYSE:INN) is the only REIT that has outperformed Chatham:
Since my initial investment in Chatham (in December 2014), the market was less enthusiastic; even after a 25% dividend increase (in January), there has been no capital appreciation.
Consequently, it’s now time to take a closer look at Chatham and determine if this REIT has the power to keep chalking up the dividends that are generated by this differentiated model of repeatability.
