Looking At Casino And Gambling Related Dividend Stocks
Investing in sin stocks is nothing new and many have found great opportunities and profits pouring money into alcohol, tobacco and gambling stocks. In fact, casino and gambling related ventures are rapidly expanding beyond the Vegas strip and tribal lands into China’s growing gambling mecca, Macau. Several big players in this space now derive most of their revenue from Macau including Wynn Resorts and Las Vegas Sands. It’s no surprise then that a lot of attention is being placed on the Chinese gambling market as 2014 total revenue exceeded $44 billion compared to approximately $6.5 billion for the Vegas strip. Of course, being a dividend driven investor I am on the lookout for names that not only potentially provide capital appreciation but can also provide a solid, steady and growing passive income stream via dividend distributions. With that being said let’s examine some of the more popular casino and gaming dividend stocks.
First up is a very familiar name among casino stocks, Las Vegas Sands Corp. (LVS). Based in Las Vegas, NV, LVS owns and operates casinos and resorts under its namesake as well as The Venetian, Four Seasons, Sands and The Palazzo among others. Currently yielding a generous 4.70% dividend with a relatively high payout ratio of 78.5% on an EPS of 3.51, LVS has a short dividend history which may provide relatively small dividend increases going forward. However, this fact is tempered by the relatively high current yield received. On a valuation basis, LVS has a current PE of 15.8 with a similar forward PE making it cheaper than the market as a whole and much lower than its five year average PE of 125.9. Of course, having a Morningstar rating of four stars doesn’t hurt either.
Another very familiar name in the casino and resort space is Wynn Resorts Ltd. (WYNN). Also base in Las Vegas, NV, WYNN operates under its namesake as well as the Encore brand in both Macau and Las Vegas. Another generous dividend yielding stock, WYNN sports a current 4.10% yield with a very high payout ratio of 90.2% on an EPS of 8.20. Having a longer dividend history than LVS, WYNN offers a very respectable five year annualized dividend growth rate of 9.34%. While future raises might be less generous there seems to be a commitment to a current high yield. From a valuation perspective WYNN trades with a current PE of 17.8 which is well below its five year average PE of 70.7. As with LVS, WYNN also sports a four start rating from Morningstar.
Looking for a Macau pure play casino and resort stock? Then check out Melco Crown Entertainment Limited (MPEL). Headquartered in Hong Kong, MPEL owns and operates casino gaming and resort facilities primarily in Macau and parts of Asia. Currently offering a relatively low 1.10% yield with an extremely low payout ratio of just 5.7% on an EPS of 1.33, MPEL has plenty of room to grow its dividend or at the very least keep paying its very safe yield. With a current PE of 18.9 and a forward PE of 16.0, MPEL seems to be relatively in line with its casino and resort peers, LVS and WYNN. As with the previous two names mentioned, Morningstar gives MPEL a four star rating as well. Is anyone noticing a trend here?
Dividends can also be found from companies that supply casinos with their gaming equipment. One of the more popular names in the space is International Game Technology (IGT). Headquartered in Las Vegas, NV, IGT designs, develops, manufactures and markets video casino gaming equipment as well as various slot machine games. Basically, if you ever gambled on a machine in any casino you used an IGT product especially since IGT has a true global footprint with operations in Europe, the Middle East, Africa, Latin America, the Caribbean, Asia, Australia, New Zealand and the Pacific. IGT offers a decent current yield of 2.56% with a moderate payout ratio of 42.3% based on an EPS of 0.82. Looking at current numbers the dividend does appear to be safe despite having to cut its dividend back in 2009 to conserve cash after the economic meltdown hurt many gaming companies. IGT has since been on the mend increasing dividends at a nice pace having an five year annualized dividend growth rate of 12.89%. Looking at IGT’s valuation of 21.0 places this stock at slightly more expensive than the market as a whole with a much more attractive forward PE of 14.6. It seems like share price ran a little ahead of this name in recent times.
Of course for those who like to invest in REITs I would simply like to mention Gaming and Leisure Properties, Inc. (GLPI). GLPI is a “triple net” lessor of real estate property to the gaming industry across multiple states in the U.S. Of course, being a REIT, GLPI currently offers a very high 6.22% yield. This might be an interesting name to research further for those who like to invest in REITs. For now my interest in the space is primarily health care REITs.
Clearly, when deciding where to invest in the gaming sector one has quite a few dividend paying options. Some might opt for the relatively high current yield of the American casino/resort companies such as LVS or WYNN or perhaps go the lower yielding Chinese growth route of MPEL. IGT seems to offer a more balanced dividend payout with a decent yield, long dividend history as well as attractive dividend growth rates. And of course for those dividend investors that love REITs there is always GLPI that might deserve more scrutiny. Most of the names mentioned above also seem to be trading at fair valuations relative to the market and might offer relative good buys at current levels.
Have you ever looked into casino or gaming stocks for your dividend portfolio? Please let me know below.
Disclosure: Long NONE