Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn’t sustainable. In others, the dividend is so low, it’s not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.
Today, and one day each week for the rest of the year, we’re going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn’t to say that these stocks don’t share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week’s selection.
This week, we’ll turn out attention to the gambling sector to a company that has been anything but a gamble for investors, Las Vegas Sands Corp. (NYSE:LVS), and discuss why it makes for an excellent dividend stock you can buy right now.
Always bet on red
The knock against the casino sector is twofold. First, the capital investment needed to build resorts and casinos is phenomenally high, which often puts casinos deeply into debt. If the cash flow is there and the equity level is high, this isn’t a problem. In other cases it’s downright scary. Take Caesars Entertainment Corp (NASDAQ:CZR), for example, which has roughly $19.5 billion in net debt and could have trouble keeping up with its interest payments if it takes on any additional debt.
The other knock against the sector is merely that it’s cyclical and prone to downswings – especially for the casino operators relying heavily on the currently stagnant U.S. market. MGM Resorts International (NYSE:MGM) Grand is an example of a casino operator that’s expanded into Macau but still derives the majority of its business from the United States. Unsurprisingly, it hasn’t turned an annual profit since 2007 and isn’t expected to until at least 2015.
Competition can also be a bit of a concern for Las Vegas Sands Corp. (NYSE:LVS). Wynn Resorts, Limited (NASDAQ:WYNN) presents formidable competition in Macau because of its attractiveness to upper-income earners. Also, the prospect of legalized online gaming could put Las Vegas Sands Corp. (NYSE:LVS) at a distinct disadvantage, since its CEO, Sheldon Adelson, has no desire to align his company’s plans for such a future. Should online gaming be legalized, social-media dud Zynga Inc (NASDAQ:ZNGA) could become a stud with the infrastructure already in place to help reap the rewards of the $36 billion global online gaming industry. Then again, without online gaming, Zynga Inc (NASDAQ:ZNGA) is a muddled mess … but that’s an entirely different story altogether.