All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Parsippany, Wyndham Hotels (WH) is a Consumer Discretionary stock that has seen a price change of 11.45% so far this year. Currently paying a dividend of $0.43 per share, the company has a dividend yield of 2.04%. In comparison, the Hotels and Motels industry's yield is 0.9%, while the S&P 500's yield is 1.41%.
Looking at dividend growth, the company's current annualized dividend of $1.72 is up 4.9% from last year. Over the last 5 years, Wyndham Hotels has increased its dividend 5 times on a year-over-year basis for an average annual increase of 31.51%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Wyndham's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.
WH is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $4.85 per share, with earnings expected to increase 5.90% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, WH is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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Wyndham Hotels & Resorts (WH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).