Is it Wise to Retain Host Hotels Stock in Your Portfolio Now?

Host Hotels & Resorts Inc. HST is poised to witness revenue per available room (RevPAR) growth from a solid portfolio of upscale hotels across lucrative markets. Also, a strategic capital-recycling program and healthy balance sheet augur well.However, macroeconomic uncertainty and a cautious approach by many businesses are likely to hurt demand for its properties in the near term. The elevated interest expenses add to its concerns.Last December, Host Hotels’ board of directors announced a special dividend of 10 cents per share. This is in addition to a quarterly cash dividend of 20 cents per share.What’s Supporting Host Hotels?Host Hotels has a strong Sunbelt exposure and presence in the top 21 U.S. markets. Its properties are advantageously located in central business districts of major cities with close proximity to airports and resort/conference destinations, thus driving demand. The improvement in group travel demand and business transient demand has aided occupancy and RevPAR growth over the past few quarters. The company is also experiencing continued strength in group business.The company follows an aggressive capital-recycling strategy that entails the non-strategic dispositions of assets that have lower growth potential or properties with significant capital expenditure requirements and redeploying the proceeds for investments in better-yielding assets. It has prioritized projects in assets and markets that are anticipated to recover faster.Per the company’s November 2024 Investor Presentation, from 2021 through the end of the third quarter of 2024, total dispositions amounted to $1.5 billion, 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength, and pave the way to capitalize on long-term growth opportunities.Host Hotels has a healthy balance sheet and has been undertaking steps to fortify its balance sheet. As of Sept. 30, 2024, the company had $2.3 billion in total available liquidity. As of the same date, the weighted average maturity for its debt was 5.5 years and the weighted average interest rate was 4.8%. Further, as of the end of the third quarter of 2024, the company enjoyed investment-grade ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch, providing access to the debt market at favorable costs.Solid dividend payouts are the biggest attraction for REIT investors, and Host Hotels remained committed to that. Encouragingly, the company has increased its dividend eight times in the last five years and has a 41% payout ratio. Hence, with rebounding operating trends, a lower dividend payout ratio compared with the industry and a healthy financial position, we expect the latest dividend hike to be sustainable in the upcoming period.What’s Hurting Host Hotels?Host Hotels’ growth has been hindered by the slow recovery from the wildfires in Maui, a moderation in domestic leisure transient demand due to increased travel to international locations and a gradual post-pandemic rebound in specific markets, such as San Francisco.Moreover, most of Host Hotels’ properties are concentrated in the luxury and upper-upscale segments, and the hotel industry is cyclical and heavily dependent on the overall health of the economies in which it operates. Particularly, during economic downturns, these segments bear the brunt as unfavorable macroeconomic conditions compel customers to reduce discretionary spending and choose lower-priced brands over the company’s premium ones.Despite the Federal Reserve announcing rate cuts recently, the interest rate is still high and is a concern for Host Hotels. The company has a substantial debt burden and its total consolidated debt as of Sept. 30, 2024, was approximately $5.08 billion. For 2024, we project interest expenses to increase 13.1% year over year.Analysts seem bearish on this stock, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share being lowered marginally over the past week to $1.95.Shares of this Zacks Rank #3 (Hold) company have declined 2.3% over the past six months against the industry's growth of 2.6%.Image Source: Zacks Investment ResearchStocks to ConsiderSome better-ranked stocks from the broader REIT sector are Cousins Properties CUZ and OUTFRONT Media OUT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share is pegged at $2.68, which suggests year-over-year growth of 2.3%.The Zacks Consensus Estimate for OUTFRONT Media’s 2024 FFO per share stands at $1.73, which indicates an increase of 5.5% from the year-ago period.Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report Cousins Properties Incorporated (CUZ): Free Stock Analysis Report OUTFRONT Media Inc. (OUT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks