January 5, 2014 in City

Motley Fool: Marriot’s growth continues to reward shareholders

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Associated Press photo

Marriott management delivers solid returns, with a focus on shareholder value.
(Full-size photo)

Marriott International (Nasdaq: MAR) is on the move again thanks to a general upswing in travel and the IPO of larger rival Hilton spurring interest in the sector. But you might do well to go with Marriott instead.

With more than 3,800 properties in 74 countries and 19 hotel brands, Marriott rakes in more than $13 billion annually. Its brands include the Ritz-Carlton, Bulgari, Renaissance, Courtyard, Fairfield Inn, Residence Inn and Springhill Suites.

The company’s franchise model has been working, and there’s significant insider ownership, with about 25 percent of shares held by Marriott family members. The company rewards shareholders with a dividend that recently yielded 1.4 percent, and it has bought back nearly $2 billion of shares in the past few years.

In its last quarter, Marriott’s revenue grew by 15.8 percent over year-ago levels, while earnings rose 12 percent, with both numbers topping expectations. The company is growing its business, with around 850 properties in development and an additional 144,000 rooms on the way, mainly international. It recently bought rights to an African property that will make it Africa’s biggest hotel company.

Sporting a price-to-earnings ratio near 23, the stock isn’t a screaming bargain, but it’s not vastly overvalued, either. Quarter after quarter, and year after year, Marriott management has delivered solid returns with a focus on shareholder value. Growth-seeking investors should take a close look.

Ask the Fool

Q: I found a stock trading for less than a dollar per share that pays out more than a dollar per share in a dividend! A good deal? – R.R., online

A: Think twice about any stocks trading below $5 per share. They’re penny stocks and are often volatile and risky. And with any dividend payer, it’s smart to see how much it’s earning each year, as you want earnings to more than cover dividend obligations, lest the dividend end up reduced or eliminated.

My dumbest investment

Back in the 1980s, I saw an article about a new company. It sounded really interesting, and I had a gut feeling it would be a good investment. I spoke to my broker, but he talked me out of investing in it. One word: Microsoft! I’ve never trusted a stockbroker since. – E.W., Farmington, N.M.

The Fool responds: That’s a painful loss, as Microsoft shares have grown more than 500-fold since they debuted in the mid-1980s. Not all stockbrokers are savvy, skilled and working hard to maximize your gains. But even the best of them make some bad calls now and then, as do the best investors. And when Microsoft was young and small, it was far from clear that it would grow to dominate its market so much. There are small companies around today that people will be slapping their foreheads about in regret 20 years from now.

It’s best to take responsibility for our own investment decisions, ideally doing our own research and thinking. If that’s too much, as it is for many, opt for a simple, inexpensive broad-market index fund.


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