How is the Las Vegas Sands Using Its Cash Flows?




The Las Vegas Sands (LVS) has been focused on controlling costs in the already weak Macao region. The company generated better cash flows as it focused on the higher margin mass and non-gaming segments, as well as the geographic diversification of its cash flows.

This Integrated Resort business model has helped the company attain more than $1 billion in adjusted property EBITDA (earnings before interest, tax, depreciation, and amortization) during the quarter.

Article continues below advertisement

Share repurchase program

The Las Vegas Sands has been aggressively returning cash to its shareholders since it started its share repurchase program in June 2013. Since then, the company has returned $2.38 billion to shareholders through the repurchase of 34 million shares, which included $80 million of common stock. The company has an unrestricted cash balance of $1.86 billion at the end of 3Q15.


The Las Vegas Sands (LVS) has been consistently increasing its dividend payouts to its shareholders. The company paid a quarterly dividend of $0.65 per common share during 3Q15, which was 30% higher than the payout in 3Q14. The company also declared that it would increase its dividend payout by 10.8% to $2.88 per share for 2016.

LVS has the highest dividend yield among its peers. LVS has a forward dividend yield of 5.5% compared to the SPDR S&P 500 ETF’s (SPY) 2.3%. Wynn Resorts (WYNN) has a dividend yield of 3.03%, Melco Crown Entertainment (MPEL) has a dividend yield of 1.18%, and MGM Resorts (MGM) does not pay any dividends.

Although better dividend payouts could mean better returns for investors, the continuous cash distribution despite the lack of revenue growth could indicate that the company lacks better investment opportunities. A high dividend payout, along with declining stock prices, is usually considered an indicator of a deteriorating business that could see a lack of growth opportunities in the next few years.

Investors who want to avoid the risk of investing in a single casino company can look at ETFs that invest in casino stocks. One of these funds is the VanEck Vectors Gaming ETF (BJK). For a broader exposure to this industry, you can consider investing in the iShares US Consumer Services ETF (IYC).

In the final article in this series, we’ll look at how the 3Q15 earnings have affected LVS’s valuation.


More From Market Realist