Park Hotels & Resorts: Well-Covered Dividend And Undervalued Shares

Core Viewpoint - Park Hotels & Resorts Inc. is positioned as a strong investment opportunity in the U.S. hotel industry, particularly for dividend-focused investors, given its solid financials and favorable market outlook for 2024 [1][5]. Financial Performance - Revenue has recovered since 2021, surpassing pre-pandemic levels, with FFO per share showing significant growth [4][18]. - In Q3 2023, RevPAR was $178.25, a 4.11% increase year-over-year, while ADR rose by 1.85% to $250.93 [18]. - For 2023, FFO per share increased by 32.5% to $2.04, indicating strong revenue recovery [18]. Dividend and Valuation - The company pays a quarterly dividend of $0.25 per share, yielding 6.55%, with a payout ratio of 47.43% based on the last quarterly AFFO [6][12]. - The stock is trading at a slight discount to tangible book value of $16.36, which is considered unjustified given the company's prospects [13]. Leverage and Liquidity - Following a strategic default on a $725 million loan, the company's leverage improved, leading to an upgrade in credit rating from S&P Global from B to BB- [5]. - Approximately 50% of assets are funded by debt, with a debt/EBITDA ratio of 5.45x and interest coverage of 2.8x [5][11]. - The company has $378 million in liquid assets, representing 4.16% of total assets, and access to a $950 million revolver [5]. Market Position and Outlook - The portfolio consists of 43 hotels with 26,000 rooms, primarily concentrated in Hawaii and Orlando, which contribute nearly half of EBITDA [9][10]. - Room demand in Hawaii increased by 3.7% year-over-year, while Orlando is experiencing a recovery in RevPAR [10]. - The overall outlook for the U.S. hotel industry remains positive despite potential economic headwinds [10]. Management and Governance - Management compensation appears shareholder-friendly, with the CEO's package representing only 1.44% of cash NOI generated in 2023 [20]. - The company has a history of capital gains from property dispositions and has initiated a stock repurchase program of $300 million [20].