We recently compiled a list of the 10 Best Casino Stocks that Pay Dividends. In this article, we will have a look at where Vail Resorts, Inc. (NYSE:MTN) ranks among other casino stocks that pay dividends.
The casino industry is making a comeback after the setbacks caused by the pandemic in 2020. It took a while for the sector to recover, with several factors at play, but the rebound is now clear with the easing of social distancing measures. Data from the Gaming Inspection and Coordination Bureau showed that Macau’s gaming revenue surged by 14.8% in August this year, surpassing expectations. The increase in demand for entertainment during China’s summer vacation has driven growth in the world’s largest casino hub. Casino stocks fall under the larger leisure and hospitality sector and are affected by a range of influences, such as the state of the economy, consumer spending habits, and changes in gambling regulations.
Also read: 10 Best Casino Stocks To Buy According to Analysts
Investor confidence in the casino industry has also skyrocketed, thanks to their ability to consistently hit it out of the park over the years. Casino revenues experienced a notable increase in 2023. Additionally, online casinos, which mainly gained importance during the pandemic, also posted record earnings last year. A report by the American Gaming Association (AGA) revealed that brick-and-mortar casino slots and table games generated a record $49.4 billion in 2023, marking a 3.3% increase over 2022. On the state level, 19 out of 27 traditional gaming markets achieved record annual revenues. Online casino revenue also surged in 2023, growing 22.9% year-over-year to $6.2 billion across the six states with fully legalized iGaming. The report further highlighted that 12 of the top 20 commercial casino gaming markets saw revenue growth, with the Las Vegas Strip leading the way with the most significant year-over-year gains.
The casino industry, like many others, is evolving quickly to keep up with current trends. In a recent move, Singapore has made changes to the Casino Control Act, allowing its two casinos to offer cashless gaming options, though cryptocurrencies will not be permitted, as reported by CNA. Cashless bets can be placed at gaming tables or machines by using virtual credits from cashless gaming accounts or e-wallets. This adjustment is the most recent update to casino regulations in Singapore, which had previously tightened rules by lowering the threshold for monitoring cash deposits at casinos to prevent misuse by terrorist and criminal groups.
The shift to cashless betting has highlighted people’s growing preference for digital platforms. The pandemic underscored the need for contactless options while still allowing people to enjoy these activities. Sports betting is also becoming more prominent since it operates through digital channels, providing a similar thrill to that of casinos. According to the AGA, while commercial gambling revenue is on the rise in most states where it’s legal, the growth in sports betting and online gambling is outstripping that of traditional casinos. So much so that it seems that Americans are withdrawing funds from their stock brokerage accounts to support their online betting habits. This is the main conclusion from a recent working paper titled Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households. The paper suggests that for every dollar spent on sports betting, net investments in stocks and other financial assets decreased by just over $2. With that, we will now take a look at some of the best casino stocks that pay dividends.
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Our Methodology:
For this list, we scanned Insider Monkey’s database of Q2 2024 and selected companies that are involved in the casino and gambling industry. These companies own and operate casinos, resorts, and other gaming and entertainment facilities. From the resultant list, we picked the 10 best casino stocks that pay dividends to shareholders and ranked them in ascending order of the number of hedge funds having stakes in them as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
5. Vail Resorts, Inc. (NYSE:MTN)
Number of Hedge Fund Holders: 29
Vail Resorts, Inc. (NYSE:MTN) ranks fifth on our list of the best casino stocks that pay dividends. The Colorado-based resort and casino company has approximately 37 ski resorts across North America. The stock is down by over 52% from its 2021 high as it continues to struggle with the effects of weak consumer spending that began during the 2020 pandemic. In addition, reduced snowfall at several North American resorts and concerns about the company’s debt levels are also contributing to its decline. The stock has declined by over 16% since the start of 2024.
However, Vail Resorts, Inc. (NYSE:MTN) experienced better overall conditions in March and April, with increased visitation at its western North American resorts, thanks to improved weather conditions. As a result, the company achieved record levels of resort net revenue and Resort Reported EBITDA in fiscal Q3 2024. This growth was driven by the stability provided by its advanced commitment strategy, excellent operational execution, and continued strong increases in ancillary spending per skier visit across its ski school, dining, and rental services at the resorts. The company generated $1.28 billion in revenues during the quarter, which saw a 3.6% growth from the same period last year. Its net income came in at $362 million, up from $325 million in the prior year period.
Vail Resorts, Inc. (NYSE:MTN)’s balance sheet remains solid, with a total cash and revolver availability of around $1.3 billion as of April 30, 2024, including $705 million in cash on hand. Its debt position is still concerning for investors as it has nearly $3 billion in total debt as of the most recent quarter with a deb-to-equity ratio of 2.2. However, the company’s increasing cash reserves could potentially offset its debt levels, which is something investors are relying on.
Artisan Partners also highlighted Vail Resorts, Inc. (NYSE:MTN)’s growth prospects in its Q2 2024 investor letter. Here is what the firm has to say:
“We also added to our existing position in Vail Resorts, Inc. (NYSE:MTN), a premium skiing, lodging and resort company, that has fallen by nearly 25% over the past year. Mother nature didn’t cooperate this past winter as there was below-average snowfall early in the ski season and highly variable temperatures. That contributed to reduced visitation, which had second-order effects on retail, rental and lodging activity. On the positive side, growth in advanced pass sales drove low-single-digit growth in lift revenues, while labor costs were well controlled. Vail is one of a couple dominant players in an industry that benefits from high barriers to entry due to the fixed supply of suitable mountains. Of course, this is a highly seasonal business, dependent on appetite for ski vacations and the right weather conditions, but the company has made strides to improve the business model by increasing the percentage of its business from the advance commitment pass product, which transforms the business from one of uncertainty and weather dependency to one of greater visibility and predictability. This provides stability and the ability to spend on capex during the off season to improve the guest experience, as well as pursue additional footprint expansion.”
One of the best casino stocks, Vail Resorts, Inc. (NYSE:MTN) has been making regular dividend payments to shareholders since 2011. Although the company cut its dividend by 50% in 2021 because of the pandemic, it continued to pay dividends without interruption. Currently, it offers a quarterly dividend of $2.22 per share for a dividend yield of 5.02%, as of September 12.
Insider Monkey’s database of Q2 2024 indicated that 29 hedge funds owned stakes in Vail Resorts, Inc. (NYSE:MTN), up from 27 a quarter earlier. These stakes have a consolidated value of over $701.3 million.
Overall, MTN ranks 5th on our list. While we acknowledge the potential for MTN to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MTN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.