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RLJ Lodging: This 7.4%-Yielding REIT Is A Hold

Published Thu, 07 Feb 2019 17:05:28 -0500 on Seeking Alpha

Investment Thesis
RLJ Lodging Trust (RLJ) is a geographically diversified lodging REIT in the United States. The REIT operates premium-branded hotels that tend to attract more customers and resulted in higher occupancy rates and average daily rates. The company also has a solid balance sheet. However, the performance of RLJ Lodging is highly dependent on the strength of the economy. Despite its attractive dividend yield, given the fact that we are now in the latter stage of the economic cycle, we think the best time to invest in this REIT is to wait till the initial stage of the next economic cycle.

Source: YCharts
Q3 2018 Financial Highlights
Like many other REITs, RLJ Lodging posted unimpressive Q3 2018 earnings result. As can be seen from the table below, its Q3 2018 (three months ended on Sept. 30, 2018) occupancy ratios declined to 79.6% from 80.9% in Q3 2017. While the company increased its average daily rate from $169.54 in Q3 2017 to $170.78 in Q3 2018, its revenue per available room declined slightly from $137.23 in Q3 2017 to $136.02 in Q3 2018.

Source: Q3 2018 Supplemental
This unimpressive Q3 was a result of several headwinds such as July 4 falling on the midweek, difficult comps from post-hurricane recovery efforts last year, and the impact of Hurricane Florence this year.
What we like about RLJ Lodging
Despite its unimpressive Q3 2018 result and revised 2018 outlook, we identified several positives of RLJ Lodging:
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
RLJ LODGING TRUST 16.20   20.5 0.79 1.32 8.29


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