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 as well as online at places like playclub-uk.com. 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
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net
28 thoughts on “Roll The Dice On These Dividend Stocks”
I took on a starter position in WYNN about a month ago with 10 shares. They are doubling the number of rooms at their Macau casino and then their plans to build a casino in Boston. Until then i’ll sit back and collect 4% on the dividend.
Nice job starting a position in WYNN. As you said, until their growth translates to higher earnings sit back and get paid to wait. The relatively high yield is a nice bonus too. Macau is definitely the growth story for most casino operators and that’s where the real long term growth is anticipated. It already is much larger than Las Vegas and is the cornerstone of revenues for a lot of these companies. Thank you for stopping by and commenting.
Between two nice growth dividend stocks, I always tend to choose the one that do “more” good. I’m not saying an investor can’t make money into them, but it’s simply not a sector I’m a fan of. Especially during economic uncertainty when people spend less in “luxury” expenses like gambling and casino. Regardless, you found some good fundamentals here!
DivGuy recently posted…2015 Best Dividend Stocks – 30 Stocks to Beat the Market
There’s no question that the gaming sector is not considered a staple by any means and that it is one of the first to suffer during economic downturns. However, you cannot dismiss the amazing growth that has happened in the space, especially in Macau, over the last decade. I can understand being hesitant to invest in such a sector but you have to admit some of those current yields are looking pretty juicy and there is still a lot of runway ahead for many of these companies. As always, I appreciate your comment.
You are right, I’m not saying they are bad investments. I just think the stock market is big enough I don’t have to pick among casino 😉 Mind you, some people may say that I’m not better as I hold the best shale gas well driller in my portfolio 😉
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Fair enough and it’s true one does not have to be invested in every corner of the market to have a successful long term dividend growth portfolio. Appreciate the reply.
Oh man the real sin stocks, they put cigarettes and beer to shame! As an investor they do have a general appeal. However, as a person I am troubled with the idea of giving them more money…
On a more serious note, not a fan of those high as hell payout ratios for the 1st two. I wonder if casinos are becoming saturated in the USA, especially now that nearly every state allows it on the East Coast. I see promise for them in Macau and overseas in general. That one MPEL you list though is very intriguing, but unfortunately I’d expect to lose some payout to Chinese taxes – a big potential downside.
Still, always interesting to see a new industry under review. Probably my favorite type of articles in general.
I can understand you not wanting to give any sin stock “more money” but why not invest in a high yielding sin stock like WYNN or LVS or PM for that matter and let the sin stock give you “more money.” While you bring up a great point about the moral quandary of investing in such an enterprise you also make an interesting point regarding foreign taxes as taking a bite out of dividend income. While this isn’t the case for WYNN or LVS I can understand your hesitance because of the relatively high payout ratio and question the long term stability of those dividends. As you said, it’s still interesting to look at an industry that’s not discussed much among the dividend bloggers yet pays pretty high yields. Thank you for stopping by and commenting.
Interesting list, the first two probably has too high of payout ratio for my comfort. I haven’t looked into gaming sector at all as I’m focusing more on consumer sector. I don’t consider gaming sector a stable sector.
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I happen to agree with you regarding the stability of the gaming sector. It seems when tough times come, the luxury and recreation sectors get hit first and that’s when cash flow seems to dry up as well. Still, the high current yield might cushion some of those blows while you hold the stock. As always, I appreciate your comment.
I intend to invest in some sin stocks myself at some point, have my eye on a few at the moment, just not pulled the trigger yet.
I’ve never been to Vegas but have been to Macau a few times, not really to gamble but to watch the high rollers there….incredible the amount of money that’s thrown about!
Good luck with your picks!
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Sin stocks always get a bad wrap from some but many have performed quite well for many years along with being steady dividend payers as well. Cigarette stocks such as PM and MO come to mind along with many alcohol related stocks such as BUD or DEO too. I too visited Macau a few years ago and was amazed at the amount of gambling that goes on there. While the Las Vegas hotels may be more impressive, in my opinion, the gambling in Macau was second to none. Thank you for sharing your thoughts.
Good stock list DivHut. I’ve yet to roll my dice on these stocks.
Keep up the good work!
There are some interesting high yielding names in the sector for sure that also have the promise of continued growth going forward. For now my only sin stocks are in the tobacco and alcohol realm. Thank you for commenting.
I’m always a little curious on the ownership/CEO of said companies, do you have any glowing reviews for any of the above mentioned or not so glowing reviews?
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I do not have any reviews for any of these companies regarding insider ownership though it is relatively easy to find. For example, here you can see all the major holders of WYNN. I know that the more insiders own a particular stock the better but not sure what is the magic number an investor might seek. Thank you for stopping by and commenting.
Casinos is no like others, everybody who go to a casino, even the “good one” will say, I’m going to stop at $20, $50, … Etc. people coming in knowing they could risk losing, but will do it anyway. It’s almost like a sure thing to bet on the house, because they have a big advantage with the odds. On top of that many will offer free booze, people will make less educated guess when they are drunk.
Well, you know the saying “never bet against the house,” which is essentially what you stated in your comment and through good economic times and bad the casinos seem to prevail. Sure, some go bust and others get acquired but that’s usually a symptom of excessive debt during bust times. Whether you like to invest in sin stocks or not there’s no denying their ability to continue to pay out dividends. Thank you for commenting.
Very interesting facts and topic. I never thought of investing in Casino related stocks although I see that they offer very high dividend yield. Their payout ratio is probably too high and I don’t know whether I would be comfortable investing in Casino sector yet. I will have the Casino sector on my watch list.
Thanks for the interesting article.
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The casino and entertainment resort sector is definitely one that is very tied to economic cycles and often follows booms and busts of macro-economic environments. That being said, as you pointed out, you are getting paid quite handsomely to wait with a pretty generous yield that may smooth out the ebbs and flows of the stock’s underlying performance. As always, I appreciate your comment.
Interesting, Las Vegas Sands, Melco and Wynn were the first 3 stocks that I ever owned. Which is kinda fun, since pretty much no one in Sweden knows about them. My poker-playing friend that was traveling the world told me about them, and he had done some ground research, as well as stock-analysis, and suggested that I’d pick them up in my new started portfolio.
I looked at them, and I did. This was in June 2013, and I picked up Sands at 58,8. Unfortunately I panicked after a while and sold it in August, for 57,25. Just before the stock started going up. Fortunately I’ve learned my lesson now and I just might add some of the stocks to my portfolio again.
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Thanks for sharing your experience with buying Las Vegas Sands, Melco and Wynn. I have to say that it’s quite rare to find an investor that has held positions in all three of the major dividend paying casino stocks. As you pointed out all have performed quite well in recent years despite headwinds that are now appearing in Macau. From many of the comments here I can see that these stocks are not as popular as they should be even though they all have pretty high yields. I think it’s great that you got a heads up regarding these stocks from your “poker-playing friend.” What better way to learn about a company than from someone who actually has visited these establishments. Thanks for your insight regarding these casino stocks and for your lesson learned about not panic selling in the future. I appreciate your stopping by and commenting.
LVS was my first stock purchase back in 2009. An older friend gave me a “stock tip” and I had no idea at the time about the market. I went home and logged onto my computer and started my first online brokerage account and placed my order. It did really well for me! I have since sold it, but I’ve been looking at it again too.
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As I commented to Swedeconomist, I am surprised that these stocks have not found themselves into more dividend portfolios. Your positive experience with LVS highlights the fact that these stocks have performed quite well for the last several years while also paying out a very generous yield. Congrats on your LVS win. Thank you for stopping by and commenting.
I’ve held stock in LVS for some time now and I really enjoy the dividends. If you only own one casino, that’s probably the one to own. I’ve looked at WYNN for some time but I’ve never been able to execute the buy cause I can always find stocks in other industries I want more. I wish you the best.
Thanks for sharing your experience holding onto LVS. I know that many dividend investors take issue with owning casino stocks and that many have traditionally been bad performers. Of course, the two standouts seem to be LVS and WYNN with their continued capital appreciation and high dividend yield. Hopefully this overview will enable others to do further research and see for themselves that some of these gaming stocks are more solid than they first appear. As always, I appreciate your comment.