Dividend Investors Shouldn’t Ignore Las Vegas Sands Corp.
February 8, 2017
Las Vegas Sands Corp. Rewards Dividend Investors
Las Vegas Sands Corp. (NYSE:LVS) is a stock that should be considered by dividend investors. A high-dividend-paying stock, Las Vegas Sands Corp. is trading at $51.88, with a current dividend yield of 5.63%.
But is this dividend sustainable? In order to answer this question, consider LVS stock’s history. Have there ever been any dividend cuts? Have any payments been missed?
What else is relevant info to shareholders, both present and future? Let’s take a closer look.
Las Vegas Sands has been paying a dividend since 2012 and has never missed or cut a payment. Rather, the dividend has seen annual growth and appears sustainable. So the only real question is whether this growth can continue.
The company’s administration has said that the dividend would continue to grow as long as cash flow does. At the moment, 55% of earnings are being generated from the Chinese autonomous region of Macao/Macau. There should be one such increase in cash flow from “The Parisian Macao,” which has just completed construction. (Source: “4Q16 Earnings Call Presentation,” Las Vegas Sands Corp. January 25, 2017.)
This project, and Macao in general, may become a large source of company earnings. For evidence, look no further than the region’s double-digit growth; the highest growth area in the industry. Visitors to Macao are also spending more money when compared to the same quarter last year, with an increase in both overnight stays and stay length.
There are several reasons for this. First, the Chinese middle-class is experiencing rapid growth, and has more disposable income to spend as a result. Tourists from neighboring countries are also coming to Macao to get a similar experience as they would in Las Vegas, but with less travel involved.
Another reason that Macao can see further growth is the easy access that visitors will have to transportation. The area features a high-speed rail system that is expanding across mainland China. This will give the middle class a easier commute and will benefit Las Vegas Sands in other areas of its business.
Las Vegas Sands offers the most diverse non-gaming offerings in Macao, including lodging, retailing, dining, and entertainment. This gives the company a more diverse customer base that ends up spending money in multiple areas.
Also, the main levels of Las Vegas Sands’ resorts are for business tenants to rent retail space for areas such as dining and retail. With Las Vegas Sands seeing visitors stay longer and spend more money, it means that the company’s retailer partners also benefit. This is also a boon to LVS stock, since the retail partners’ success means a lower probability of having vacant retail space.
Valuation
LVS stock is currently trading at a price-to-earnings (P/E) ratio of 25.4 times, which is cheaper than the industry average of 38.6 times. The lower ratio means that less money is being paid for the company’s stock based on its earnings.
One reason for the lower valuation could be that the market is unaware of LVS stock’s future growth. It’s also possible that investors are looking at companies with a smaller market cap instead, because there is a greater chance of the size of those companies doubling.
However, investors should still take a hard look at LVS stock, because the valuation could get a boost and be in line with the industry average as the company’s future growth is recognized.
Final Thoughts on LVS Stock
LVS stock boasts a sustainable dividend that stands to grow further. It is also expected to enjoy future cash flow growth.
If you are considering owning Las Vegas Sands shares, you can get paid to wait until the market realizes that LVS stock is trading at a discount to its industry peers.
