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Dividend Dog:

Dover Downs Gaming and Entertaining Inc (DDE) is a 165,000 square foot casino and entertainment facility located in Dover, Delaware. Presently the company provides gaming options including card games, table games, electronic games and slots, sports betting, and other dining and hospitality options. Additionally, the company operates a four diamond hotel and a harness horse racing track. The company has a proven history of always paying a quarterly dividend. However, new out of state competition and diminishing returns should be cause for concern amongst investors.

  • DDE has demonstrated a weakened financial position over the past couple of years. The company has seen its cash position, total assets, and overall net income shrink considerably.

Date

Cash*

Total Assets*

Net Income*

Dec 2011

$18,634.00

$216,184.00

$46,550.00

Dec 2012

$14,993.00

$205,262.00

$42,961.00

*Numbers in thousands

  • DDE has consistently cut its quarterly dividend payment since 2007. In 2007 the quarterly dividend was 5 cents per share. The dividend was recently cut from 3 cents per share to 2 cents per share in 2013. This works out to be annualized at 8 cents per share or around 3.9%

  • DDE is experiencing increased regional competition from nearby casino operations in neighboring Maryland. In the company's quarterly report for the fourth quarter of 2012, the company cited a 23% decline in slot wins due to the opening and expanding of Maryland Live! Facilities. Additionally, the company reported a net loss of $520,000 for the quarter.

  • Shares are trading around $2.00 per share, down about 9.65% year to date, well off a 52 week high of $3.08 per share.

Possible Surprise:

Providence and Worcester Railroad (PWX) is a small scale Class C freight carrying railroad with operations in Massachusetts, Connecticut, Rhode Island, and New York. The company operates over a track network of about 516 miles. Investors should look to the following positive signs for to substantiate this potential dividend play.

  • PWX has reported substantial improvements in operating income and gross profits over the past three years. Note the substantial improvements in operating income. As noted in the 2012 annual report, the company noted that part of the increase in profits was due to a decrease in fuel consumption costs. While the decrease in costs were due to decreased freight movements, existing contracts were able to yield improved earnings.

Date

Operating Income*

Gross Profits*

Dec 2010

-$28.00

$12,662.00

Dec 2011

$430.00

$13,879.00

Dec 2012

$2,481.00

$14,963.00

*numbers in thousands

  • PWX has demonstrated major consistency in quarterly dividend payments. The company has consistently paid a quarterly dividend of 4 cents per share since the first quarter of 1999. This works out to be $0.16 per share, annualized at about 1.1%. In comparison, much larger players CSX corp. (CSX) and Norfolk Southern (NSC) pay 2.3% and 2.7% respectively. Those looking for a lower cost alternative may find PWX appealing.

Summary:

DDE has demonstrated that increased regional competition has caused a decrease in income for the company. Customers that had once traveled to Delaware from Maryland for gaming services now utilize closer options. A drop in income has corresponded with consistent cuts in the dividend rate. Alternatively, PWX has seen profits and income increase over the past three years. Additionally, PWX has demonstrated great consistency in annual payouts over the last 13 years or so. Granted trading volume on PWX is relatively low, returns have been very consistent for investors.

Source: 1 Dividend Dog To Avoid And A Possible Surprise To Satisfy Investors