Hospitality Properties Trust (HPT) is a Newton, Mass.-based real estate investment trust, or REIT, which owns 288 hotels and 185 travel centers located in 44 states, Puerto Rico and Canada. Its brands include Marriott and Travel Centers of America.
Currently, HPT’s yield stands at a solid 7.3%. And using a strategy of selling covered calls against HPT stock, I think that you comfortably could double that yield over the next 12 months.
Here’s how…
HPT is renovating 170 of its 288 hotels in 2012 and 2013. At least 55 projects will be underway during the first quarter of 2012.
Management has warned that the negative short-term impact of these costs will offset or exceed the growth in revenues from properties not under renovation. First quarter 2012 revenue performance is expected to be flat, compared to the same period in 2011. In fact, results over the two years are likely to be choppy due to the timing of the renovations and the hotel brand conversions.
On the one hand, this situation is terrific for the long-term prospects of HPT. The operating performance of the 47 hotels that the organization renovated in 2010 and the first three quarters of 2011 saw revenues per available room jump 18.9%.
On the other, it also means that the stock is likely to remain in a trading range over the next year or so.
So, here’s how buying shares of HPT will help you generate double-digit percentage annual returns:
First, HPT already boasts a solid 7.30% dividend. In fact, on March 1, the company declared a regular quarterly dividend of $0.43 payable on or about April 16, 2012, to holders of record at the close of business on March 30, 2012.
Second, as I think the stock will be weighed down by the impact of the renovations, HPT is the perfect stock to sell covered call options against. So, I’m recommending that you sell the June $25 call options (HPT120616C00025000). So buy Hospitality Trust (HPT) at market today, and place your stop at $21.50.
Specifically, sell one options contract for every 100 shares of HPT you purchase. That will put 95 cents per share, or $95, in your brokerage account immediately. Now, all you have to do is sit back and wait until June 16 for these options to expire worthless.
Based on the current stock price, selling the covered calls would give you an additional 3.8% in income over the next three months or so.
Repeating this process over the next 12 months could easily “Double Your Dividends.” Naturally, I will be instructing you about any future covered call trades to make to capitalize on this money-making opportunity with HPT.
P.S. Please join me for the Las Vegas Money Show, May 14-17, at Caesar’s Palace. To register, call 1-800/970-4355 and mention priority code 026655 or go to NicholasVardy.lasvegasmoneyshow.com. I also encourage you to sign up for my hedge fund seminar, Wednesday, May 16, 9 a.m. – 11 a.m.
