LVS Stock Offers the Best of Both Worlds: Growth and Income
LVS Stock Is a Top Dividend Stock That Income Investors Should Consider
In the gambling world, there is widely used saying: “the house always wins.” If this has any truth to it, why not consider an investment in a company that operates in the casino industry?
When searching for a top great stock in this segment, I found one that not only pays a dividend, but consistently grows the payout annually. Shareholders are also paid via other, additional methods when there is surplus cash available.
The company I am referring to is Las Vegas Sands Corp. (NYSE:LVS). LVS stock is paying out a dividend on a quarterly basis and currently yielding 4.52%–a high dividend, to be sure.
While the company does operate in Las Vegas as the name implies, it and the rest of the U.S. actually accounts for the smallest portion of total revenue and growth. Rather, nearly 90% of every dollar generated is coming from the overseas markets in Asia; Macau, China specifically accounts approximately 55% of total revenue. (Source: “4Q16 Earnings Call Presentation,.” Las Vegas Sands Corp., January 25, 2017.)
Shareholders Getting a Piece of the Profits
Shareholders have been rewarded using three different methods, two of which have put more money in the pockets of investors.
First, as noted LVS stock pays a quarterly dividend. What’s more this dividend has seen growth of more than 100% over the past five years. For instance, in 2013, the dividend was $0.35 per share, while today it is $0.73.
Second is the occasional special dividend paid alongside the regular one. Only occurring when surplus cash is available, the special dividend paid in 2012 represented what was 11 times the regular dividend at the time.
The last method is share buybacks. And while this move doesn’t give shareholders cold, hard cash, they do benefit from now owning a larger piece of the company. For the first quarter of 2017, Las Vegas Sands bought back 2.7 million shares, valued at $150.0 million total with a weighted average price of $55.06. (Source: “Las Vegas Sands Reports First Quarter 2017 Results,.” Las Vegas Sands Corp., April 26, 2017.)
Las Vegas Sands started investing in Macau, China in 2002, diversifying away from its initial investments in the U.S. The reason for the shift is that China has been an underdeveloped market when it comes to the casino sector, leaving many opportunities available. This move has paid off for the company and, more importantly, investors.
The margins from Macau are in the double-digits and higher than those seen from the U.S.In fact, Las Vegas Sands has higher margins and market share in Macau than all of its direct competitors. It is also the only company in Macau that has gained market share since 2012; every other company’s market share has decreased. (Source: Las Vegas Sands Corp., January 25, 2017, op cit.)
With higher margins and increasing market share in Macau, a future dividend hike could be in the works. And with more money left over once expenses are accounted for, there’s more flexibility to pay out a special dividend or repurchase more shares.
Final Thoughts About LVS Stock
LVS stock’s income dividend received should not be the only return it provides, given that growth in Macau should eventually make for a higher trading price.
Overall, Las Vegas Sands Corp. is one of the top dividend stocks and a great example of a shareholder-friendly business.