Choice Hotels International (NYSE:CHH) Will Pay A Dividend Of $0.2875

Choice Hotels International, Inc.'s (NYSE:CHH) investors are due to receive a payment of $0.2875 per share on 16th of January. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

View our latest analysis for Choice Hotels International

Choice Hotels International's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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 44.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was $0.74, compared to the most recent full-year payment of $1.15. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Choice Hotels International Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Choice Hotels International has impressed us by growing EPS at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Choice Hotels International's prospects of growing its dividend payments in the future.

In Summary

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 dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Choice Hotels International (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.