Special Dividend At Las Vegas Sands And Its Implication

| About: Las Vegas (LVS)

Las Vegas Sands Corp. (NYSE:LVS) gave its shareholders something to cheer about as it announced a special cash dividend. The announcement gave a boost to LVS shares, which were up more than 4% in pre-market trading on Tuesday.

Special Dividend

After-market close on Monday, the casino operator announced that its board of directors approved a $2.75 per share special cash dividend, which will be payable on December 18, 2012 to shareholders of record as on December 10, 2012.

With the announcement, LVS joined a growing list of companies that have either announced a special end-of-year dividend payment or moved up their quarterly dividend payout in order to protect shareholders from potentially paying higher taxes on dividend income starting in January, 2013. If lawmakers in Washington D.C. fail to reach an agreement on the fiscal cliff issue, automatic spending cuts and tax increases will take effect on January 1, 2013.

The uncertainty due to the fiscal cliff has forced a number of companies to review their dividend payout policies. According to data from Bloomberg, from the end of September to mid-November, 59 companies in the Russell 3000 stock index announced a one-time cash payment to shareholders, up from around 15 in the same period last year. The maximum tax rate on dividend income since 2003 has been 15%. However, this rate could rise significantly if a deal on the fiscal cliff issue is not reached before the year-end deadline.

Through the special dividend, LVS will be distributing around $2.26 billion to its shareholders by the end of this year.

Earlier in the month, LVS also raised its quarterly dividend by 40% to $0.35 per share, starting in the first quarter of 2013. The company will pay quarterly dividend of $0.25 per share for the fourth quarter on December 28, 2012 to shareholders on record as of December 20, 2012.

Special Dividend Reflects Strong Balance Sheet

According Sheldon G. Adelson, Chairman of Las Vegas Sands, returning capital to shareholders remains a long-term priority for the company.

Adelson said, "What this special dividend really represents is the unique position our company currently enjoys in the hospitality, leisure and gaming industry. The cash flow of our current operations and the strength of our balance sheet have put us in the enviable position of both returning capital to our shareholders while at the same time staying true to our roots as a growth company."

Adelson said that the company will be very aggressive in identifying and targeting new development opportunities that meet its criteria for investment return and that will help it grow its cash flow even higher in the years to come.

Q3 Results

LVS reported its third-quarter results earlier this month. The company saw record financial results in Macao, which boosted its overall results for the third quarter.

Net revenue for the quarter was $2.71 billion, which represents an increase of 12.5% over the third quarter of 2011. The company's consolidated adjusted property EBITDA in the third quarter of 2012 was $876.9 million, down 5.1% over the third quarter of 2011. LVS's consolidated adjusted property EBITDA margin for the third quarter fell to 32.4% from 38.4% in the third quarter of 2011.

Las Vegas Sands reported adjusted net income of $382.2 million, or $0.46 per share, compared to $444.8 million, or $0.55 per share reported for the same period in the previous year.

LVS's market share of gross gaming revenue in Macao reached 19.3% in the third quarter of 2012, compared to 14.3% reported in the third quarter of 2011. Adjusted property EBITDA in Macao rose 25.7% in the third quarter of 2012 to a record $487.9 million. The increase was driven by record gaming values in Macao.

How Other Casino Operators Performed in Q3

Las Vegas Sands' rivals Wynn Resorts Limited (NASDAQ:WYNN) and MGM Resorts International (NYSE:MGM) reported their quarterly results late last month.

Wynn Resorts

WYNN reported third-quarter net revenue of $1,298.5 million, compared to $1,298.3 million reported for the same period in the previous year. The company's adjusted property EBITDA for the quarter was $402.6 million, compared to $381.1 million reported for the same period in the previous year. Adjusted net income for the quarter was $149.2 million, or $1.48 per share, compared to $132.6 million, or $1.05 per share reported in the same period last year.

MGM Resorts International

MGM's consolidated net revenue for the third quarter of 2012 rose 1% to $2.3 billion, driven by a 7% increase in MGM China's net revenue. The company's consolidated casino revenue for the quarter rose 4%. Casino revenue at MGM China rose 7%. Rooms revenue for the third quarter of 2012 fell 3%, mainly due to a 2% drop in revenue per available room (REVPAR) at MGM's Las Vegas Strip resorts. MGM's wholly-owned domestic resorts reported adjusted property EBITDA of $325 million, down 7% over the same period in the previous year. MGM China reported third-quarter adjusted EBITDA of $152 million.

LVS's consolidated net revenue growth for the third quarter was significantly higher than that of MGM and WYNN.

LVS has Outperformed MGM and WYNN

The announcement of special dividend has lifted LVS shares in trading on Tuesday. At last check, the stock was trading 4.18% higher at $45.87.

(Click to enlarge)

Source; stockcharts.com

LVS has outperformed both WYNN and MGM this year. While LVS has gained nearly 7.50% YTD, WYNN and MGM have fallen 1.83% and 4.21%, respectively, in the same period.

LVS trades on a P/E (TTM) of 26.70, which is higher than the industry average of 20.17. However, LVS commands a premium thanks to its strong operating performance and balance sheet.

My Take on LVS

Las Vegas Sands' decision to pay a special cash dividend reflects the company's confidence in its operations and balance sheet. The company is also committed to returning capital to shareholders. Overall, LVS looks in a strong position to invest in growth opportunities while rewarding its shareholders at the same time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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