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A Suspended Dividend that's About to be Reinstated



March 04, 2012 – Comments (1) | RELATED TICKERS: BEE.DL

I came across a neat article in last week's Barrons that I thought everyone here might find interesting.  I couldn't talk about it earlier because I actually purchased one of the stocks listed in it for my real-world portfolio.  I bought the Strategic Hotels & Resorts Preferred C shares.  They provide an 8.25% yield at face value, which is $25/share.  The company hasn't paid dividends since the economic implosion, but it appears ready to resume payments in June.  At that time it will pay $7.22/share in back dividends.  After backing that out, you're looking at a yield of slightly over 9% going forward.  This is the sort of odd investment that I love.

"STRATEGIC HOTELS & RESORTS is a real-estate investment trust that owns and manages luxury hotels like the Four Seasons in Jackson Hole, Wyo., the Ritz-Carlton in Half Moon Bay, Calif., and the Fairmont Hotel in Chicago, among others. After the financial crisis of 2008, Strategic stopped paying dividends on its common and preferred shares, but Litespeed stepped in to scoop up the preferred about two years ago. They now trade at $29, up from $18.50 when the fund started buying.

"The properties are fantastic, and are recovering occupancy rates, although they're not back to the peak in 2007 yet," she says.

This summer the company will pay hefty back dividends owed on the shares, Zimmerman adds. Unpaid dividends payable on June 29, 2012, will be $7.22 per share, which works out to about an 8% return for the firm. If the preferreds trade at par once dividends are reinstated, the shares will be worth $32.22, Zimmerman estimates."

Happy Days in Distress

I added the common stock of Strategic Hotels to my CAPS portfolio under the theory that if it has enough money to begin paying its preferred dividends again in the near future, as a REIT it may begin paying dividends on the common sooner rather than later.  Obviously a REIT that doesn't pay a dividend isn't all that attractive to most regular investors, so if BEE reinstates its divy I expect its common stock to do well too.  I have to repeat though that I do not own the common stock in real life and only bought it in caps because the preferred shares are not available here.


1 Comments – Post Your Own

#1) On March 05, 2012 at 10:53 AM, Option1307 (30.57) wrote:

Thanks for sharing, +1!

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