Studies show that both a spinoff and its parent company outperform comparable firms for several years following their split. That’s especially true with industry leaders like these two.
The parent company increased its quarterly dividend by 9.8% on an earnings jump of 14.4%, while the spinoff increased its quarterly dividend by 16.0% as earnings surged 12.3% during the most-recent quarter.
Shares in the now-former parent company trade at just 8.6 times the 2019 earnings forecast while the spinoff is available at 17.1 times its projection.
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WYNDHAM DESTINATIONS INC. (New York symbol WYND; www.wyndhamdestinations.com) is the former Wyndham Worldwide (WYN). It changed its name at the same time it spun off Wyndham Hotels on June 4, 2018.
Now Wyndham is the world’s largest vacation ownership and exchange company. It operates 220 vacation timeshare resorts with 880,000 owners.
On June 1, 2018, Wyndham Worldwide (old New York symbol WYN) spun off Wyndham Hotels. Investors received one share of the new company for each WYN share they held. The remaining firm then changed its name to Wyndham Destinations.
With the March 2019 payment, Wyndham Destinations increased its quarterly dividend by 9.8%, to $0.45 a share from $0.41. The new annual rate of $1.80 yields a high 3.9%.
In the quarter ended June 30, 2019, overall revenue rose 3.2%, to $1.04 billion from $1.00 billion a year earlier. The company’s vacation ownership segment, which accounts for 78% of its overall revenue, saw sales increase by 5.2% during the quarter, offset by lower sales in its Exchange & Rentals division.
Excluding one-time items, earnings jumped 14.4% to $135.0 million from $118.0 million. Per-share earnings saw an even bigger gain, rising 22.9% to $1.45 from $1.18, on fewer shares outstanding.
In the first six months of 2019, Wyndham repurchased 3.6 million shares of its stock for a total cost of $155.0 million or $43.06 a share.
The company’s shares now trade at just 8.6 times its forecast 2019 earnings of $5.42 a share.
Dividend Stocks: Spinoff is the world’s largest hotel franchise company
WYNDHAM HOTELS & RESORTS (New York symbol WH; www.wyndhamhotels.com) is the world’s largest hotel franchise company, with 817,000 rooms spread across 9,200 hotels and more than 80 countries.
The company’s Wyndham Rewards program has more than 50 million members and will now partner with food delivery service DoorDash. That company is one of the largest and fastest-growing on-demand food delivery providers in the world, offering its services in more than 4,000 cities in the U.S. and Canada.
Guests at Wyndham hotels will receive free delivery on all orders through DoorDash to over 3,700 Wyndham locations. In addition, first-time DoorDash customers receive an additional $5 off plus 2,000 bonus Wyndham Rewards points.
With the March 2019 payment, Wyndham Hotels increased its quarterly dividend by 16.0%. The new annual rate of $1.16 yields 2.2%.
In the quarter ended June 30, 2019, revenue jumped 22.5%, to $533.0 million from $435.0 million a year earlier. The gain came mostly from the $2 billion acquisition in May 2018 of La Quinta’s 900 hotels. The addition of these properties more than offset revenue loss due to the sale of the Knights Inn brand in April 2018.
The company’s RevPAR (revenue per available room) globally was $44.06, 2.6% higher than a year earlier. Excluding its 2018 acquisitions and divestitures, the global RevPAR increased by 0.40%.
Earnings, excluding one-time items, rose 12.3%, to $82.0 million, or $0.84 a share, from $73.0 million, or $0.73. On a per-share basis, earnings increased 15.1% due to fewer shares outstanding.
The stock trades at 17.1 times the forecast 2019 earnings of $3.11 a share.
Recommendation in Dividend Advisor: Wyndham Destinations and Wyndham Hotels are a buy.
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