LVS Stock: Is Las Vegas Sands Stock Taking a Gamble?
November 7, 2016
LVS Stock Should Be Taken Seriously
Many people go to Las Vegas and try to hit win big bucks by visiting the various casinos. But for dividend investors, there is another way to hit the jackpot withing ever stepping foot in “the city that never sleeps.”.
Las Vegas Sands Corp. (NYSE:LVS) is a company that is rewarding dividend investors with growth from overseas. LVS has operations in the casino and resort business and has been part of the famous Las Vegas Strip for 28 years. Just like other businesses, LVS has seen both good times and bad, but the company has used its experience to create a winning formula while approaching the business from a global standpoint. Let me explain.
Fierce Competition
The most important factor for visitors going to select a resort is location, so Las Vegas Sands’ resorts and casinos are located right in the heart of the Las Vegas Strip. The company’s resorts and casinos in Las Vegas are the “The Venetian” and “The Palazzo,” which are considered part of the elite properties on the strip. Right next to them are resorts owned and managed by competitors Wynn Resorts, Limited (NASDAQ:WYNN) and Caesars Entertainment Corporation (NASDAQ:CZR).
Las Vegas Sands has a growing business, seeing 6.9% earnings before interest, taxes, depreciation, and amortization (EBITDA) growth in the U.S. The high-end casino and resort industry is considered a steady cash flow business with various events, such as mixed martial arts events and concerts, spread out throughout the year. The big growth driver for the company is Macau, which is considered “the Las Vegas of China.” (Source: “Las Vegas Sands Reports 3Q16 Earnings Call Presentation,” Las Vegas Sands Corp., November 3, 2016.)
Las Vegas Sands also operates in Singapore to add a bit more diversification. The earnings from Singapore account for 34%, while 53% of their earnings come from China; that’s why it is important to see growth from China.
The company’s latest resort in China, “The Parisian,” opened on September 13. Through until the end of the month, the property generated $1.1 million in revenue per day; since the project cost $1.2 billion, that means the return on capital has begun. The current target rate is a 20% return on capital for projects. There are still plans in the works for more development projects that will be completed in the coming years. Las Vegas Sands does own more land around The Parisian, but in the meantime, the focus is serving its current customers.
Since Las Vegas Sands has figured out the winning formula in Asia, they now have their eyes on future developments in South Korea and Japan. With more growth drivers on the horizon for LVS stock, shareholders would of course be rewarded. (Source: Ibid.)
Dividend and Share Repurchases
As the old saying goes, the house always wins. And looking at the shares of LVS stock, shareholders are definitely winning. Since 2012, the dividend has grown 288% and the current dividend per share on an annual basis is $2.88. Based on the current trading price of $59.38, the dividend yield is 4.85%.
The year 2012 marked the first year that a dividend was paid, during which an extraordinary special dividend was paid out to LVS stockholders. At the time, the quarterly dividend was $0.25 and the special dividend was $2.75. In addition to dividend payments, management has repurchased just over $2.4 billion of shares. (Source: “Stock Repurchase History,” Las Vegas Sands Corp., last accessed November 7, 2016.)
With future plans down the line to expand the company’s footprint in Asia and the operations experience of management, it is highly likely that shareholders will continue to see dividend hikes. With the excess cash flow, share repurchases can be completed or a special dividend can be offered as in 2012.
Final Thoughts on LVS Stock
LVS stock is one of my favorite gambling stocks. Shares are currently trading below their recent high in March 2014 of $87.03. Patient dividend investors may want to consider owning Las Vegas Sands shares and getting paid to wait until the new revenue stream from South Korea and Japan starts to roll in.
