Stocks To Stay In Your Portfolio
Marshall Hargrave: The four-week average jobless claims are at the lowest levels we’ve seen since the start of the Great Recession in 2007.
More jobs will translate into higher discretionary income.
What better way to spend that money than on a getaway. We’re nearly two-thirds through the second most popular month of the year for vacations, behind only July, but we still have the fourth most popular month to go, September.
This vacation season could be one of the best in years. Question is: Which industry will be one of the biggest benefactors of these solid vacation numbers?
When individuals and families decide to take a vacation they don’t always fly, but they almost always stay in a hotel.
But the really great news about owning hotel stocks is that they will also get a boost from increased business travel.
The increase in employment that we’re seeing means more companies are hiring, suggesting they are more bullish on the economic environment. The Global Business Travel Association notes that spending on business trips should rise nearly 7% this year, versus 2013. And where do these business travelers stay? Hotels.
The leading hotel data collector, STR Global, projects that U.S. hotel demand was stronger than expected in the second quarter. Along with that, the research firm upped its full-year 2014 occupancy and average daily rates expectations.
Occupancy is expected to rise 2.6% year-over-year for 2014 and average daily rates are expected to be up 4.2%. So not only are hotels seeing increased demand, but they’re also getting higher revenues per room.
Driving these rate increases is a low-supply environment. During the recession, we saw a steep pullback on new hotels being built and even closure of underperforming locations. This low-supply environment will give the remaining players the opportunity to increase prices going forward.
Without further ado, here are the top 3 hotel stocks to stay in your portfolio:
Hotel Stock No. 1: Marriott International (Nasdaq: MAR)
Marriott runs the Ritz-Carlton, Renaissance, Courtyard, Fairfield and Marriott brands, among others. It has quadrupled its number of brands to 20 over the last two decades and now operates in nearly 80 countries.
This stock has been one of the best performers in the space over the last three years. Its shares have outperformed the Dow Jones U.S. Travel & Leisure Index (DJUSCG) by 50% over that period.
Marriott’s dividend yield, at 1.2%, is the lowest of the three stocks I’m listing. But it’s very shareholder friendly, given its buyback plan.
It repurchased $300 million worth of shares during the second quarter and has purchased over $700 million in shares year-to-date. For all of 2014, Marriott expects to return between $1.35 billion to $1.6 billion to shareholders, which at the midpoint is roughly 7.5% of its market cap.
Marriott is also looking to tap into the large and growing Chinese market. China is Marriott’s second-largest market besides North America. The hotel operator plans to double its number of China properties by 2015.