Sunstone Hotel Investors, Inc. Announces 40% Dividend Increase on Strong Second Quarter Results

Sunstone Hotel Investors Announces 40% Dividend Increase Amid Strong Q2 Results - A Promising Outlook for Shareholders


Sunstone Hotel Investors, Inc. (NYSE: SHO), a leading hospitality real estate investment trust (REIT), recently reported its second-quarter operational results for the period ending June 30, 2023. The company demonstrated robust financial performance, achieving significant growth in key metrics. As a testament to its solid performance and commitment to shareholder value, Sunstone has decided to increase its quarterly common dividend by 40%.

Second Quarter 2023 Operational Results

Sunstone posted strong second-quarter results, highlighting its ability to navigate through challenging market conditions. Some key performance metrics include:

  1. Net Income: The company's net income for the second quarter was $43.1 million, showing a notable increase compared to $37.7 million during the same period last year.
  2. Comparable RevPAR: Sunstone achieved a 3.6% increase in Comparable RevPAR, reaching $245.91. This growth was supported by a healthy average daily rate (ADR) of $319.36 and an occupancy rate of 77.0%. Notably, the Company's urban and group hotels saw an impressive 10.7% increase in RevPAR.
  3. Adjusted EBITDAre: Sunstone's Adjusted EBITDAre, excluding noncontrolling interest, experienced a significant 15.0% increase, reaching $85.1 million, showcasing the company's effective cost management strategies.
  4. Adjusted FFO: The company's Adjusted FFO attributable to common stockholders per diluted share increased by 10.0%, reaching $0.33, reflecting strong financial health.

CEO Bryan A. Giglia's Optimistic Outlook

Sunstone's CEO, Bryan A. Giglia, expressed satisfaction with the portfolio's performance during the quarter. Despite challenges in leisure travel, the company's properties generated profitability above the high-end of their guidance ranges. The group hotels demonstrated steady demand trends and healthy ancillary spend, contributing to overall profitability. Additionally, Giglia expressed encouragement regarding the ongoing recovery in urban markets, especially San Francisco, which showed steady growth as the market recovers.

Dividend Increase: A Commitment to Shareholders

Consistent with its strategy of returning capital to shareholders, Sunstone's Board of Directors decided to increase the quarterly common dividend to $0.07 per share. This represents a substantial 40% increase compared to the previous dividend. The decision to raise dividends is in line with the company's belief in the normalized taxable income its portfolio can produce over various cyclical periods. Sunstone remains dedicated to delivering value to its owners while focusing on capital recycling and portfolio investment.

Financial Snapshot

As of June 30, 2023, Sunstone reported cash and cash equivalents of $163.5 million, including restricted cash of $55.7 million. The company's total assets amounted to $3.1 billion, with net investments in hotel properties reaching $2.8 billion. Total debt stood at $820.1 million, and stockholders' equity was reported at $2.1 billion.

Capital Investments and Outlook

During the second quarter and first six months of 2023, Sunstone invested $26.7 million and $49.2 million, respectively, into its portfolio. The company plans to invest approximately $120 million to $140 million into its portfolio during 2023, with a focus on renovation and conversion projects. Sunstone anticipates incurring approximately $11 million to $13 million of EBITDAre displacement in 2023 due to planned capital investments.

For the third quarter of 2023, Sunstone expects net income to range between $8 million to $13 million and total portfolio RevPAR growth to range from -1.0% to +2.0%. Adjusted EBITDAre is projected to be between $57 million to $62 million, with Adjusted FFO attributable to common stockholders ranging from $38 million to $44 million.

Sunstone Hotel Investors, Inc. has delivered impressive operational results for the second quarter of 2023, with robust growth in net income, RevPAR, and Adjusted EBITDAre. The company's decision to increase the quarterly common dividend by 40% underscores its commitment to shareholder value. As Sunstone continues to navigate through the evolving market conditions, its focus on capital investment and delivering value remains unwavering.

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