Is Las Vegas Sands’ 4.9% Dividend Yield Enough to Offset Share Price Drop? (LVS)
By: Ned Piplovic,
While resort and casino giant Las Vegas Sands Corporation (NYSE: LVS) has seen its share price drop approximately 25% since June 2018, the company has hiked its annual dividend for six consecutive years and currently offers a dividend yield of nearly 5%. Will a growing dividend payout and substantial annual yield be enough to counter the downtrend in the share price?
The trading history of LVS has been a turbulent one. The 2008 financial crisis caused the stock to drop from $138 per share to less than $2, only to rally back up to more than $85 in the next five years. However, the stock experienced another blow in 2014 as the Chinese government instituted new laws limiting the ability of hotels and casinos to operate in the country. Once these laws began to loosen in 2016, the company’s share price doubled before reversing trend again earlier this year.
While the latest decline was driven primarily by fears of a potential full-scale trade war with China, the company’s current financial and operational situation looks promising. In August 2018, total revenues from Macau rose 17%, and the trend could easily continue as the Chinese government has recently announced its intention to increase tourism to Macau. Additionally, following the 2010 expansion into Singapore, LVS is looking at diversifying into other countries in East Asia, as well as expanding further in the U.S. market.
In addition, Wall Street analysts anticipate that LVS’ profit will increase more than 17%. While that high growth rate is for the current year only, analysts still expect an average profit growth rate of 7.2% per year through 2023. Based on the current earnings consensus of $3.56 per share for the current year, the company’s 17.1 forward price-to-earnings (PE) ratio would be nearly 23% below the company’s five-year average.
To put it simply, a dispersion of trade war fears could easily put LVS on fast growth track over the next few years. Investors who see the current price decline as a temporary pullback and a buying opportunity may want to take advantage of the upcoming dividend payment and purchase shares before the September 18, 2018 ex-dividend date. The next quarterly distribution will take place on Sept. 27.
Las Vegas Sands Corporation (NYSE:LVS)
Based in Las Vegas, Nevada and founded in 1988, the Las Vegas Sands Corporation and its subsidiaries develop, own and operate integrated resorts in the United States and Asia. The company’s U.S. properties comprise the Venetian Resort Hotel Casino and The Palazzo Resort Hotel Casino on the Las Vegas Strip, the Sands Expo and Convention Center in Las Vegas, and the Sands Casino Resort Bethlehem in Bethlehem, Pennsylvania. In addition to its current U.S. operations, the company also owns and operates seven hotel resorts in Macau, China and Singapore. Las Vegas Sands’ integrated resorts include accommodations, gaming, entertainment, retail, convention and exhibition facilities, celebrity chef restaurants and other amenities.
Year to date, not counting dividends, LVS is down about 8.5%. This is because the 12-month period includes a 34% rise as part of an uptrend that began in January 2016. It is only since June of this year that the share price began falling sharply, reaching a 52-week low of $60.50 on Sept. 11. Shares inched up 1.2% the following day to close at $61.24.
As far as dividends go, LVS currently pays a quarterly distribution of $0.75 per share, which corresponds to a $3.00 annual payout and a 4.9% yield, which is 11.3% higher than the company’s own 4.4% average dividend yield over the last five years.
Also, when compared to industry peers, Las Vegas Sands’ dividend yield trounces the competition. The company’s 4.9% yield outperforms the 1.93% average dividend yield of the entire Services sector by more than 150%. Furthermore, LVS has the highest current dividend yield among the top 12 companies in the Resorts and Casinos industry segment, and is 225% above the 1.51% average yield of all companies in the segment, 115% higher than the average dividend yield of the segment’s dividend-paying companies and 71% ahead of its nearest segment competitor.
Over the past six years since initiating dividend distributions, LVS has tripled its annual dividend payout by sustaining an average growth rate of more than 20% per year. While the share price decline over the past three months erased all dividend gains, any share price trend reversal would put the company’s total returns into positive territory, and closer to the 47% total return level that the company has provided over the past three years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.