DiamondRock Hospitality (NYSE: DRH) has received an upgrade from Bank of America Securities, moving from ‘Underperform’ to ‘Buy’ with a revised price target of $9.50. This shift reflects a more optimistic outlook for both the company and the broader lodging sector, which appears to be bottoming out after recent declines.
Reasons for the Upgrade
Sector Recovery
The lodging and gaming sectors have faced significant pressure, with stocks dropping between 11% and 25% since early April. However, current valuations have reached levels similar to historical lows, which often signal an upcoming rebound. This broader market context played a major role in the upgrade.
Strong Portfolio Positioning
DiamondRock’s strategic focus on leisure travel and high-demand gateway markets has positioned it well for a travel rebound. Its portfolio of 37 upscale hotels and resorts offers solid diversification and exposure to both urban and resort-driven recovery trends.
Improving Financials
Recent earnings have highlighted strong performance, with adjusted funds from operations (AFFO) surpassing Wall Street expectations. This signals operational efficiency and a stable foundation for future growth.
Dividend Fundamentals
Yield
DiamondRock currently offers a forward dividend yield of approximately 5.35%, supported by an annual dividend payout of $0.37 per share.
Consistency
The company has maintained steady quarterly payouts, with the most recent dividend of $0.08 per share issued in April 2025. This level of consistency appeals to income-focused investors.
Preferred Shares
DiamondRock also offers an 8.25% Series A Cumulative Redeemable Preferred Stock, providing an alternative high-yield option with greater income stability.
Conclusion
With improving industry dynamics and solid internal performance, DiamondRock Hospitality is regaining favor among analysts. Its combination of dividend reliability, portfolio strength, and market positioning makes it an appealing play in the recovering hospitality sector.