Chatham Lodging Trust (REIT) (NYSE: CLDT) and Diamondrock Hospitality (NYSE:DRH) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, institutional ownership, analyst recommendations, earnings, profitability, valuation and dividends.

Institutional and Insider Ownership

83.1% of Chatham Lodging Trust (REIT) shares are held by institutional investors. 3.6% of Chatham Lodging Trust (REIT) shares are held by company insiders. Comparatively, 1.1% of Diamondrock Hospitality shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Chatham Lodging Trust (REIT) and Diamondrock Hospitality’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Chatham Lodging Trust (REIT) 8.73% 3.76% 1.97%
Diamondrock Hospitality 11.47% 5.41% 3.23%

Dividends

Chatham Lodging Trust (REIT) pays an annual dividend of $1.32 per share and has a dividend yield of 6.1%. Diamondrock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.5%. Chatham Lodging Trust (REIT) pays out 200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Diamondrock Hospitality pays out 102.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chatham Lodging Trust (REIT) has raised its dividend for 2 consecutive years. Chatham Lodging Trust (REIT) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Chatham Lodging Trust (REIT) has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500. Comparatively, Diamondrock Hospitality has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Earnings and Valuation

This table compares Chatham Lodging Trust (REIT) and Diamondrock Hospitality’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Chatham Lodging Trust (REIT) $290.53 million 2.90 $106.69 million $0.66 32.58
Diamondrock Hospitality $866.34 million 2.55 $242.01 million $0.49 22.49

Diamondrock Hospitality has higher revenue and earnings than Chatham Lodging Trust (REIT). Diamondrock Hospitality is trading at a lower price-to-earnings ratio than Chatham Lodging Trust (REIT), indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Chatham Lodging Trust (REIT) and Diamondrock Hospitality, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Chatham Lodging Trust (REIT) 0 5 1 0 2.17
Diamondrock Hospitality 2 4 6 0 2.33

Chatham Lodging Trust (REIT) currently has a consensus target price of $20.30, suggesting a potential downside of 5.58%. Diamondrock Hospitality has a consensus target price of $12.00, suggesting a potential upside of 8.89%. Given Diamondrock Hospitality’s stronger consensus rating and higher probable upside, analysts plainly believe Diamondrock Hospitality is more favorable than Chatham Lodging Trust (REIT).

Summary

Diamondrock Hospitality beats Chatham Lodging Trust (REIT) on 11 of the 17 factors compared between the two stocks.

About Chatham Lodging Trust (REIT)

Chatham Lodging Trust is a real estate investment trust. The Company invests primarily in upscale extended-stay and premium-branded select-service hotels. All of the Company’s assets are held by, and all of its operations are conducted through Chatham Lodging, L.P. (the Operating Partnership). As of December 31, 2016, the Company owned 38 hotels with an aggregate of 5,712 rooms located in 15 states and the District of Columbia. As of December 31, 2016, the Company’s hotels included upscale extended-stay hotels that operate under the Residence Inn by Marriott brand (15 hotels) and Homewood Suites by Hilton brand (nine hotels), as well as premium-branded select-service hotels that operate under the Courtyard by Marriott brand (four hotels), the Hampton Inn or Hampton Inn and Suites by Hilton brand (three hotels), the Hilton Garden Inn by Hilton brand (three hotels), the SpringHill Suites by Marriott brand (two hotels) and the Hyatt Place brand (two hotels).

About Diamondrock Hospitality

DiamondRock Hospitality Company is a real estate investment trust (REIT). As of December 31, 2016, the Company owned a portfolio of 26 hotels and resorts that contains 9,472 guest rooms located in 17 different markets in North America and the United States Virgin Islands. Its business is to acquire, own, asset manage and renovate hotel properties in the United States. Its portfolio is concentrated in gateway cities and destination resort locations. It conducts its business through an umbrella partnership REIT (UPREIT) in, which its hotels are owned by subsidiaries of its operating partnership, DiamondRock Hospitality Limited Partnership. The Company is the general partner of its operating partnership and owns, either directly or indirectly, all of the limited partnership units of its operating partnership. The Company leases all of its domestic hotels to taxable REIT subsidiary, Bloodstone TRS, Inc. (TRS) lessees.

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