Wyndham Destinations’ Potential Share Price Recovery – Buying Opportunity or Not? (WYND)

Ned Piplovic

Image Source: Wyndham Destinations Corporate Website

After significant volatility over the past five years and a divestiture of its hotels and resorts division, Wyndham Destinations, Inc. (NYSE:WYMD) is attempting to establish a strong financial base and outlook on its foundation of valuable assets, revenue growth and operational efficiencies.

The share price lost more than 92% of its value in the aftermath of the 2008 financial crisis. However, after reaching its $1.32 all-time low in 2009, the share price has risen steadily and experienced only two pullbacks of more than 30% over the past decade. The second of these pullbacks occurred last year, right after the share price reached its all-time high at the beginning of 2018. However, after a significant mid-year divestiture, the new corporate entity has a strong customer base and solid balance sheet. Even with the two large corrections, the share price has increased more than 30-fold since its all-time low in 2009.

 

Financial Results

On February 26, Wyndham Destinations reported its full-year and last-quarter 2018 results. The company reported a 3% revenue increase to $956 million for the fourth quarter. The $1.27 earnings per share (EPS) figure was equal to Wall Street analysts’ expectations. Furthermore, the company returned approximately $100 million to its shareholders by repurchasing 2.6 million shares in the quarter.

Revenues rose 2.63% from $3.8 billion in 2017 to $39 billion for full-year 2018. Additionally, Wyndham Destinations delivered $580 million in adjusted cash flow. After the June spin-off and through the end of February 2019, the company returned more than $380 million to its shareholders through share repurchases and dividend income distributions.

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Wyndham Destinations also issued its revenue guidance of $4.1 to $4.2 billion for full-year 2019. Additionally, the company expects adjusted earnings between $995 million and $1.015 billion, or $5.15 to $5.35 per share.

 

Wyndham

Wyndham Destinations, Inc. (NYSE:WYMD)

Based in Orlando, Florida, and founded in 1990, Wyndham Destinations, Inc. operates as a vacation ownership and exchange company. Additionally, the company also manages and markets vacation rental properties, primarily on behalf of independent owners. Furthermore, Wyndham Destinations also develops, markets, and sells vacation ownership interests (VOIs) to individual consumers, provides consumer financing and offers property management services at resorts. The company’s current operations cover approximately 220 vacation ownership resorts and 4,300 affiliated exchange properties in 110 countries. Originally a division of the former Cendant Corporation, Wyndham Destinations was created in a 2006 spin-off as the Wyndham Worldwide Corporation. In June 2018, Wyndham Destinations spun-off Wyndham Hotels & Resorts (NYSE:WH) as its own corporate entity and the remaining Wyndham Worldwide Corporation assets resumed operations under the Wyndham Destinations, Inc. name.

 

Dividends

Wyndham Destinations announced its first quarterly dividend hike of 10% from $0.41 to the current $0.45 payout amount for the upcoming distribution in late March 2019. This new dividend amount corresponds to a $1.80 total annual amount and a 4.3% forward dividend yield. The share price growth over the past five years exceeded the growth of dividend income payouts, which suppressed the current yield 6% below the company’s own 4.6% five-year average.

However, Wyndham Destinations’ current yield still outperforms the 1.94% average yield of the overall Services sector by 122%. Additionally, as the equity with the third-highest yield in the Lodging industry segment, Wyndham Destinations’ yield outperforms the average yield of all peers in the segment by nearly 190%. Even compared to the 2.4% simple average yield of only the segment’s dividend-paying companies, Wyndham Destinations’ current yield is still almost 80% higher.

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The apparent quarterly dividend reduction from $0.66 to $0.41 between the first and second quarters of 2018 is just a function of the corporate spinoff. The $0.25 reduction is the quarterly dividend distribution paid by Wyndham Hotels & Resorts in the second quarter. Therefore, Wyndham Destinations’ current streak of consecutive annual hikes continues. Even looking at the reduced current yield, the company still advanced its total annual dividend payout more than 11-fold since the current streak began in 2010. This level of advancement corresponds to an average growth rate of more than 27% per year.

 

Share Price

After reaching its all-time high in mid-January 2018, Wyndham Destinations’ share price reversed direction and entered a 10-month decline. Riding this downtrend, the share price entered the trailing 12-month period in mid-March 2018 at its 52-week high of $53.45. The decline continued until the share price erased all its gains since the beginning of 2017 and reached its 52-week low of $33.63 on October 24, 2018.

However, the share price attempted a quick recovery by springing back almost 24% over the subsequent week. Unfortunately, the recovery attempt was foiled by the overall market correction in December 2018. By the time the overall market reached its low on December 24, Wyndham Destinations’ share price fell to just 0.7% above the October low.

Since that near-low on Christmas Eve, the share price rose initially but encountered another minor pullback to close on March 13, 2019 at $41.80. While still more than 20% below the 52-week high from the beginning of the trailing 12-month period, the current closing price is 24% higher than the October low and 27% higher than it was five years ago.

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The above-average dividend income distributions managed to offset a small portion of the share price’s 22% decline for a total loss of 18.7% over the past year. However, if the share price manages to continue its year-to-date uptrend, investors could soon start enjoying returns on their investment similar to the three-year gain of 32% and the total return of 41% over the past five years.


Ned-Piplovic

 

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.

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