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Doubling down on Las Vegas Sands
Luckily for Las Vegas Sands Corp. (NYSE:LVS)’s shareholders, you can take these concerns and shove them under the baccarat table.
The company’s first-quarter results were an all-time record for any quarter — ever! Keep in mind that both China and the U.S. are growing GDP at rates below their historical averages, yet Las Vegas Sands Corp. (NYSE:LVS) is reporting record revenue and profits. The standout for the quarter continued to be its Macau properties, which delivered a 51% increase in EBITDA. Singapore also added nicely to gains, with EBITDA in that region up by 16%.
By contrast, Wynn Resorts, Limited (NASDAQ:WYNN), which had dominated Macau for years, has struggled. Wynn’s most recent quarter did point to a 4% gain in Macau revenue, but this came at the expense of a 15% decline in in VIP table game turnover. The secret to Las Vegas Sands Corp. (NYSE:LVS)’s sudden success in China has to do with its appeal to a broader income audience, not just upper-income earners. As China, India, and other emerging markets see affluence levels in their middle class rise, Las Vegas Sands is providing the ability for these people to experience affordable luxury, which Wynn simply doesn’t offer.
Another factor to consider is that Las Vegas Sands is still reasonably priced even at 18 times forward earnings because of its rapid Macau growth. Expectations from the Street are for 21% sales growth this year and an average of nearly 14% over the coming five years. I’d consider this more than adequate growth to support an even higher multiple.
Show me the money, Las Vegas Sands
Believe it or not, the most intriguing aspect of Las Vegas Sands is the casino operators’ amazing payback. Casinos are often viewed as nothing but money-hungry entities that offer us little chance to win, but I think the best way to win with Las Vegas Sands is by purchasing its stock.
The first way Las Vegas Sands takes care of its shareholders is through a share-repurchase program, which it approved last week. The initial $2 billion sum will be used to “maximize returns to shareholders in the years ahead,” according to CEO Adelson. While share buybacks don’t put money directly into shareholders’ pockets, it does reduce the number of shares outstanding and make the company appear cheaper on a P/E basis.
The other overlooked aspect of Las Vegas Sands is its growing dividend. It’s easy for income seekers to overlook the company, because it began paying a dividend only in March of last year. However, Las Vegas Sands has already boosted that quarterly payout by 40% to $0.35 from $0.25 and now yields an annualized and respectable 2.4%. Furthermore, the company also distributed a special dividend of $2.75 in December, returning a grand total of $3.1 billion to shareholders in 2012!
I wouldn’t get too used to exceptionally large special dividends like the ones we witnessed last year, but I think that with a payout ratio of 50%, it gives income investors more than enough incentive to expect consistent, or perhaps even slightly higher, dividends in the future while still leaving Las Vegas Sands ample cash to reinvest in Macau and other overseas opportunities.
Foolish roundup
Las Vegas Sands’ business model might revolve around gambling, but its stock appears to be anything but the sort. Appealing to a larger income class of people and positioned in the highly profitable Macau market, Las Vegas Sands is hitting all the right chords with gamblers and investors around the globe. With its double-digit growth rate, a rapidly growing dividend, and a share-repurchase program focused on boosting shareholder value, I think you have all the makings of a company that could help you hit the jackpot.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned.
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