Who Wants to Bet their Dividends? LVS

When randomly looking through our buy list and stock screeners for fun, we noticed that Las Vegas Sands (LVS) is yielding 7.2%. This is high enough that the stock market might be predicting a dividend cut. With Las Vegas Sands (LVS) being our best in breed in gambling, we thought this deserved a look.

When the economy turns south, gambling often goes down to. If you feel good about your job, losing some money at a casino can be fun. If you are worried, then you might not want to risk losing a $1,000 there when you might be better off spending $250 at a theme park, or just saving your money. And with their overseas business, the strong US dollar is not good for bringing money back home. With these head winds, and I am sure a few others, Las Vegas Sands (LVS) went down a lot.

We do not believe this is the end of the world for gambling. Some tough times, sure. But we are looking at the stock market as a 35% off sale. Now, yes, the S&P is only down 13%, but that can be viewed as an average. Some companies are at a 52 week high, and some are way down. Las Vegas Sands (LVS) is down about 50% from their 2 year high. That is a sale price.

Just because something is on sale, does not make it a good purchase. Las Vegas Sands (LVS) makes money, and they have a PE ratio of about 16, which is not bad. Their earnings almost cover the dividend, and their free cash flow does covers it, with a payout of 60%. And this is when times are not the best. And numbers can become even weaker. If we wait for times to get better, then we might have to pay double for the stock. We assume the economy, which includes gambling, will do better in the future.

In January, they just raised their dividend payment to $2.88 from $2.60, or about 10% raise. So either management is delusional or their business is safe. Being that they are profitable and have a decent trailing PE ratio, we are going with safe.

So, we are betting that gambling, specifically Las Vegas Sands (LVS), will do well in the future. We bought 7 shares for $288.10, including those snake eyes commissions. They are going to start paying us $20.16 a share. When you think about making money in gambling, do you look at the slot machines, or do you look at the stock. One days, I might take my stock winnings and go gambling. But for now, I am betting the stock market is better than Black Jack for me.

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