Chatham Lodging Trust Announces 2023 Distribution Characterization
- None.
- None.
Insights
From a taxation perspective, the classification of dividends is critical for shareholders. The dividends from Chatham Lodging Trust are entirely characterized as Taxable Ordinary Income and eligible for Section 199A dividends, which pertain to the Qualified Business Income Deduction (QBI). This deduction allows certain taxpayers to deduct up to 20% of their QBI from a pass-through entity, which can include REIT dividends. The lack of a return of capital component suggests that the REIT is operating with sufficient earnings to cover the dividend, rather than returning any principal investment back to shareholders.
This could be indicative of a stable or improving operating environment for Chatham Lodging Trust, as return of capital often occurs when dividends exceed current earnings and profits. However, investors should be aware that the absence of qualified dividend income means these dividends will not benefit from lower tax rates associated with long-term capital gains, potentially resulting in a higher tax liability.
Analyzing the dividend distribution from a financial standpoint, the consistent dividend payments across both common and preferred shares indicate a stable cash flow position for Chatham Lodging Trust. For investors, this consistency can be seen as a sign of financial health and prudent capital management within the REIT sector, especially given the challenges faced by the hospitality industry in recent years. However, the relatively small dividend per share for common stock, compared to preferred shares, reflects the standard hierarchy in dividend payments and risk.
Investors typically view preferred shares as less risky due to their priority in dividend payments and liquidation hierarchy. The information provided does not suggest any material changes in the dividend policy or financial health of the company. Yet, stakeholders should monitor subsequent financial disclosures for any signs of change that could affect the sustainability of these dividends.
The nature of real estate investment trusts (REITs) like Chatham Lodging Trust requires them to distribute at least 90% of their taxable income to shareholders in the form of dividends. The announcement reaffirms the company's commitment to this requirement and provides transparency on the tax treatment of its dividends. For the REIT industry, such clarity is beneficial as it aids investors in tax planning.
Furthermore, the focus on upscale extended-stay and premium-branded select service hotels could be a strategic advantage, as these segments might be more resilient to economic downturns compared to luxury or full-service hotels. This resilience could contribute to the steady dividend payouts we're observing.
It's also worth noting that the absence of foreign taxes suggests that Chatham Lodging Trust's operations are predominantly domestic, which could shield investors from additional tax complexities associated with international income.
Security Description |
CUSIP |
Ticker Symbol |
Record Date |
Payment Date |
Dividend Per Share |
Taxable Ordinary Income(1) |
Return of Capital(2) |
Section 199A Dividends(3) |
Series A Preferred |
16208T201 |
CLDT-PA |
3/31/23 |
4/17/23 |
|
|
|
|
Series A Preferred |
16208T201 |
CLDT-PA |
6/30/23 |
7/17/23 |
|
|
|
|
Series A Preferred |
16208T201 |
CLDT-PA |
9/29/23 |
10/16/23 |
|
|
|
|
Series A Preferred |
16208T201 |
CLDT-PA |
12/29/23 |
1/16/24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
16208T102 |
CLDT |
3/31/23 |
4/17/23 |
|
|
|
|
Common Stock |
16208T102 |
CLDT |
6/30/23 |
7/17/23 |
|
|
|
|
Common Stock |
16208T102 |
CLDT |
9/29/23 |
10/16/23 |
|
|
|
|
Common Stock |
16208T102 |
CLDT |
12/29/23 |
1/16/24 |
|
|
|
|
(1) Form 1099-Div box 1a |
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(2) Form 1099-Div box 3 |
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(3) Form 1099-Div box 5 |
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No portion of the dividends declared in 2023 represented foreign taxes or qualified dividend income.
Registered holders of Chatham Lodging Trust common or preferred shares who received any of the dividends specified in the table above will receive an Internal Revenue Service (IRS) Form 1099-DIV from EQ Shareholder Services, the company’s dividend paying agent. The Form 1099-DIV will report the dividends paid with respect to 2023. Shareholders whose shares are held in “street name” will receive an IRS Form 1099 from the bank, brokerage firm or other nominee holding their shares.
The information in the table above is based on the preliminary results of work on the tax filings of Chatham Lodging Trust and is subject to correction or adjustment when the filings are completed. No material change in these classifications is expected. The tax information above should not be construed as tax advice and is not a substitute for careful tax planning and analysis. Shareholders are encouraged to consult with their own tax advisors regarding the specific federal, state, local, foreign and other tax consequences of ownership of Chatham Lodging Trust’s shares and the specific tax treatment of distributions on Chatham Lodging Trust’s shares.
About Chatham Lodging Trust
Chatham Lodging Trust is a self-advised, publicly-traded real estate investment trust focused primarily on investing in upscale, extended-stay hotels and premium-branded, select-service hotels. The company owns interests in 38 hotels totaling 5,735 rooms/suites in 16 states and the
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 about Chatham Lodging Trust, including statements regarding future plans, strategies, performance, acquisitions, capital expenditures, future operating results and the timing and composition of revenues, among others, and statements containing words such as “expects,” “believes” or “will,” which indicate that those statements are forward-looking. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results or performance to differ materially from those discussed in such statements. Additional risks are discussed in the company’s filings with the Securities and Exchange Commission.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240122001249/en/
Dennis Craven (Company)
Chief Operating Officer
(561) 227-1386
Source: Chatham Lodging Trust
FAQ
What is the ticker symbol for Chatham Lodging Trust?
What dividends were declared by Chatham Lodging Trust in 2023?
Who will receive an IRS Form 1099-DIV from Chatham Lodging Trust?
Is the tax information provided by Chatham Lodging Trust considered tax advice?
