Braemar Hotels & Resorts: Preferred Stocks Offer High-Yield Opportunities Amid Challenges

Braemar Hotels & Resorts (BHR), a REIT specializing in luxury hotels and resorts, has maintained a disciplined approach to dividend distributions for its preferred stockholders despite operating in a volatile sector. With its recent third-quarter 2025 dividend declarations, the company has underscored the appeal of its preferred shares, offering investors attractive yields amid a landscape of rising interest rates and economic uncertainty.

Preferred Stock Dividend Highlights

Braemar's preferred stock series provide structured income streams, with varying yields and terms. The most notable series include:

1. 5.5% Series B Preferred Stock (BHR.PRB):
2. Quarterly dividend: $0.3438 per share ($1.3752 annually).
3. Payable on October 15, 2025, to shareholders of record.

4. Aligns with its 5.5% coupon rate, offering steady income for investors.

5. 8.25% Series D Preferred Stock (BHR.PRD):

6. Quarterly dividend: $0.5156 per share ($2.0625 annually).
7. Current market price: $20.85 (as of July 2025).
8. Yield: ~9.89%, exceeding its original coupon due to price depreciation.

9. Cumulative feature ensures dividends accrue even if payments are deferred.

10. Series E Preferred Stock (BHR.PRE):

11. Monthly dividend: $0.15625 per share ($1.875 annually).

12. Provides consistent cash flow for income-focused investors.

13. Series M Preferred Stock (BHR.PRM):

14. Variable monthly dividends: $0.1750–$0.17917 per share (~$2.10–$2.15 annually).
15. Offers flexibility tied to Braemar's performance or market conditions.

Key Drivers and Risks

Strengths:
- Braemar's REIT structure mandates it distribute at least 90% of taxable income as dividends, supporting preferred stock payouts.
- Its 16 luxury properties, located in prime destinations like Las Vegas and Hawaii, benefit from strong demand for high-end travel.
- Cumulative preferred shares ensure dividends accumulate if temporarily suspended, reducing income volatility.

Weaknesses:
- Braemar reported negative net income in recent quarters, reflecting the hospitality sector's cyclical challenges.
- Technical sentiment for its common stock is “Sell,” suggesting broader market skepticism about its equity value.
- Preferred stocks rank below debt in the capital structure, making them riskier than corporate bonds.

Why Preferred Stocks Stand Out

The Series D stands out for its 9.89% yield, significantly higher than its 8.25% coupon, signaling investor pessimism about Braemar's equity but creating an opportunity for income investors. The disparity arises because the stock's price has fallen below its $25 liquidation preference, boosting the yield. This could reverse if Braemar's operational performance improves or if the broader REIT sector stabilizes.

A historical analysis of dividend events since 2022 reveals further insight: a backtest of performance around dividend payable dates shows a final return of 1.78% during this period, with a 66.67% win rate over the 30 days following dividend payments. While short-term volatility persists—such as a 50% win rate in the three days post-dividend—the data suggests medium-term resilience. This supports the strategy of holding through short-term fluctuations to capture yield-driven gains.

Backtest the impact of BHR.PRD with Dividend Payable Date, from 2022 to now.", 'Rationale': "The article highlights Braemar's preferred stock yields as a key investment opportunity, particularly for Series D (BHR.PRD). Testing the performance around dividend payable dates quantifies whether these events correlate with positive returns or yield-driven investor behavior, validating the strategy's viability.

Meanwhile, the Series M offers a yield range of 8.4%–8.6%, depending on the monthly payout, providing a middle ground between stability and flexibility. Its variable dividend structure may appeal to investors seeking partial protection against declining cash flows.

Data in Context

This chart would reveal how the stock's yield has risen as its price declined, highlighting the inverse relationship between price and yield. Investors should analyze whether the yield premium adequately compensates for Braemar's risks.

Investment Considerations

• For Income Seekers: The Series D and M preferred stocks offer compelling yields, especially if Braemar's liquidity remains intact. Investors should prioritize the cumulative feature of Series D, which guarantees dividends even if payments are paused.
• Sector Exposure: Preferred stocks allow investors to bet on the recovery of the luxury hospitality sector without full equity exposure.
• Risk Mitigation: Pair preferred stock investments with a broader portfolio of high-quality bonds or REITs to balance risk.

Conclusion

Braemar's preferred stocks present an intriguing opportunity for investors seeking high yields in a low-return environment. While the company's financial struggles and technical headwinds are valid concerns, the Series D in particular offers a yield premium that may justify the risk for income-focused portfolios. However, investors must weigh Braemar's operational challenges against the structural benefits of its preferred shares. As with any investment in the hospitality sector, patience and diversification are key.

Final Note: Monitor Braemar's quarterly reports for signs of improving occupancy rates or debt management, which could further validate its preferred stock payouts.