Choice Hotels International (NYSE:CHH) Is Paying Out A Dividend Of $0.2875

The board of Choice Hotels International, Inc. (NYSE:CHH) has announced that it will pay a dividend of $0.2875 per share on the 16th of July. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.

See our latest analysis for Choice Hotels International

Choice Hotels International's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Choice Hotels International's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 59.8%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $0.74, compared to the most recent full-year payment of $1.15. This implies that the company grew its distributions at a yearly rate of about 4.5% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Choice Hotels International May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Choice Hotels International has only grown its earnings per share at 4.6% per annum over the past five years. While growth may be thin on the ground, Choice Hotels International could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Choice Hotels International's Dividend

Overall, a consistent dividend is a good thing, and we think that Choice Hotels International has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Choice Hotels International that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.