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Best Income Stocks for 2013 – Wyndham Worldwide (WYN)

One of the world’s largest hospitality companies, Wyndham Worldwide (NYSE: WYN) provides a wide range of hospitality products and services through its global portfolio of world-renowned brands. The world’s largest hotel company based on the number of properties, Wyndham Hotel Group is home to many of the world’s best-known hotel brands, with over 7,340 franchised hotels and 627,400 hotel rooms worldwide.  Strong lodging demand, particularly among business travelers, has helped drive revenue higher in recent quarters for the operator of the Ramada, Howard Johnson and Days Inn hotel chains.

Wyndham Worldwide made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Wyndham Worldwide has a potential 11.8% combined earnings accretion and dividend yield, according to Goldman.  Wyndham’s board recently raised its quarterly dividend to $0.29 a share from $0.23, an increase of 26%. Wyndham has a current dividend yield of 1.55% with a 5-year average dividend growth rate of 42%.

Trading near the $60, the stock’s 12-month price target is $75.

Wyndham Worldwide Corp.’s fourth-quarter profit improved 45% as the hotel company’s revenue was boosted by contributions from its vacation ownership and lodging segments.

Wyndham recorded a profit of $81 million, or $0.57 a share, up from $56 million, or $0.37 a share, a year earlier. Excluding acquisition and restructuring costs, and other items, per-share earnings rose to $0.63 from $0.47 a year earlier.  Revenue rose 9.4% to $1.09 billion.

The company raised its 2013 guidance, now expecting$3.57 to $3.70a share in earnings and revenue of$4.925 billion to $5.1 billion. Wyndham in October predicted$3.50 to $3.60a share and$4.9 billion to $5.05 billion, respectively.

Strong lodging demand, particularly among business travelers, has helped drive revenue higher in recent quarters for the operator of the Ramada,Howard JohnsonandDays Innhotel chains. The company late last year acquired Shell Vacations LLC, a vacation-ownership club and property management group, for about$102 millionin cash as Wyndham looked to expand its fee-for-service businesses.

The vacation-ownership business, Wyndham’s largest business by revenue, saw revenue rise 12% to$590 million. Excluding Shell Vacations, the rise was 6%.

Lodging revenue rose 19% to$223 million, benefiting from gains in revenue per available room. Vacation exchange and rentals revenue rose 0.6% to$293 million, but in constant currency and excluding acquisitions, revenue was flat from a year ago.

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