Sunstone Hotel Investors, Inc. Earnings Per Share Disclosure
13. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data):
| Year Ended | | Year Ended | | Year Ended |
| ||||
December 31, 2025 | December 31, 2024 | December 31, 2023 |
| |||||||
Numerator: | ||||||||||
Net income | $ | 24,568 | $ | 43,262 | $ | 206,708 | ||||
Preferred stock dividends, net of gain on repurchases |
| (16,110) |
| (15,228) |
| (13,988) | ||||
Distributions paid to participating securities | (247) | (273) | (310) | |||||||
Undistributed income allocated to participating securities |
| — |
| — |
| (683) | ||||
Numerator for basic and diluted income attributable to common stockholders | $ | 8,211 | $ | 27,761 | $ | 191,727 | ||||
Denominator: | ||||||||||
Weighted average basic common shares outstanding |
| 193,613 |
| 201,739 |
| 205,590 | ||||
Unvested restricted stock units | 703 | 903 | 275 | |||||||
Weighted average diluted common shares outstanding |
| 194,316 |
| 202,642 |
| 205,865 | ||||
Basic income attributable to common stockholders per common share | $ | 0.04 | $ | 0.14 | $ | 0.93 | ||||
Diluted income attributable to common stockholders per common share | $ | 0.04 | $ | 0.14 | $ | 0.93 | ||||
In its calculation of diluted earnings per share, the Company excluded 685,065, 688,288, and 1,032,266 anti-dilutive unvested time-based restricted stock awards for the years ended December 31, 2025, 2024 and 2023, respectively (see Note 12).
The Company also had 1,435,732, 1,382,074, and 1,076,160 unvested performance-based restricted stock units as of December 31, 2025, 2024, and 2023, respectively, that are not considered participating securities as the awards contain forfeitable rights to dividends or dividend equivalents. The performance-based restricted stock units were granted based on either target market condition thresholds or pre-determined stock price targets (see Note 12). Based on the Company’s total relative shareholder return and the Company’s common stock performance, the Company excluded 617,591 anti-dilutive performance-based restricted stock units from its calculations of diluted earnings per share for the year ended December 31, 2025 and 188,004 anti-dilutive performance-based restricted stock units from its calculations of diluted earnings per share for both of the years ended December 31, 2024 and 2023.
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.