Choice Hotels International, Inc. (NYSE:CHH) will pay a dividend of $0.2875 on the 16th of April. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

View our latest analysis for Choice Hotels International

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Choice Hotels International was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 26.3%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

NYSE:CHH Historic Dividend March 2nd 2025

The company has a long dividend track record, but it doesn’t look great with cuts in the past. The annual payment during the last 10 years was $0.74 in 2015, and the most recent fiscal year payment was $1.15. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. We’re glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Choice Hotels International has impressed us by growing EPS at 9.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified 1 warning sign for Choice Hotels International that investors need to be conscious of moving forward. Is Choice Hotels International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.