Considering Las Vegas Sands: Good Dividend Yield With Growth Prospects

| About: Las Vegas (LVS)

Summary

If Macau becomes the new Las Vegas, LVS appears to be well-positioned.

The trend charts and certain key technicals seem to favor growth for LVS.

LVS' Return on Equity and EBITA growth numbers look good.

LVS also offers a decent dividend yield.

Las Vegas Sands Corp. (NYSE: LVS) is the world's leading developer and operator of integrated resorts. Las Vegas Sands develops, owns, and operates integrated resorts in Asia and the United States. The company owns and operates The Venetian Macao Resort Hotel, the Four Seasons Hotel Macao, the Plaza Casino, and the Sands Macao and Sands Cotai Central in Macau, the People’s Republic of China. It also owns and operates the Marina Bay Sands in Singapore; the Venetian Resort Hotel Casino, the Palazzo Resort Hotel Casino, and the Sands Expo and Convention Center in Las Vegas, Nevada; and the Sands Casino Resort Bethlehem in Bethlehem, Pennsylvania. The company’'s integrated resorts comprise accommodations, gaming and entertainment facilities, retail facilities, convention and exhibition facilities, celebrity chef restaurants, and other amenities.

In the News

The global gambling and casino industry revenues were estimated to be about $183 billion in 2015, and grew at an average annual rate of 9.3% between 2009 and 2015.

In early 2014, the Chinese government imposed restrictions on the amount of money high rollers could gamble in Macao. The result was declining revenues and lower pricing for LVS stock.

Sands founder and chairman, Sheldon G. Adelson, ignored the short-term thinking of market analysts and stuck to his vision. Macao is the only location in China with legalized casino gaming, and three billion people live within a three-hour flight time of the city.

Macau remains the world's largest casino market. Macau has been known as a billionaire's playground. But Macau may develop into the new Las Vegas, with more mass appeal and access, featuring total entertainment value.

This transition would seem to benefit Las Vegas Sands. With its four other properties, Las Vegas Sands controls nearly half of the total rooms that gambling companies operate in Macau. Investors holding stock in Las Vegas Sands have been rewarded the past three months (prices up about 36%). The further recent stabilization and transformation of the Macau gaming market could increase gains in their shares.

The growth prospects for Macau and its gaming shareholders may really begin to heat up next year as the region becomes more tourist-friendly, with an expansion to the "Lotus" border checkpoint set to open in the nearby Cotai region, as well as a closer Pac On ferry terminal.

There will also be a new light-rail monorail system (similar to the Vegas Strip's) set to open in 2019. And expansion plans include sea landfills in five key zones expected to add around 12% to Macau's total area.

In addition, Las Vegas Sands finally opened its long-awaited Parisian Macao resort in mid-September, an almost $3 billion investment on Macau's Cotai Strip. Inspired by Paris and in a similar theme to the nearby Venetian Macao, the Parisian Macao is a lavish resort, including an Eiffel Tower replica at 50% scale. The resort has 3,000 guest rooms and suites, multiple restaurants, convention and meeting space, nearly 500,000 square feet of retail space, a 1,200-seat theater, and a water park.

Click to enlarge

(Image source: PR Newswire)

Technical Analysis as of Mid-Day, October 11, 2016

Day: 0.80%, Week: 0.34%, Month: 3.83%, Yearly: 25.73%, Year to Date: 34.74%.

The long-term trend of Las Vegas Sands is up, indicating that LVS has experienced an up trend for at least the past 180 trading days. The short-term trend of Las Vegas Sands is up - LVS has been undergoing a short-term up trend over the past 7-10 days.

The current signal for Las Vegas Sands from Market Trend Signal is buy, indicating that the stock could be advancing in its trend. The current rank for Las Vegas Sands is 83 - this means that LVS is outperforming 83% of its peers.

Click to enlarge

(click to enlarge)

(Source: StockCharts)

LVS has a rating of A by Swing Trade Bot. Long-term, mid-term, short-term trends are all up. 50 DMA, 200 DMA, ADX Trend, Relative Strength indicators are all positive. LVS had a new 52-week high on October 11, 2016.

Bullish Swing Setups - Rules (via "Hit & Run Trading II"):

1,2,3 Pullback Bullish on October 7, 2016

ADX must be more than 30 and the +DI more than the -DI. Three consecutive lower lows or any combination of 2 lower lows and an inside day. For the buy: tomorrow only, buy 10 cents above today's high. Initial stop: near today's low. Thereafter, use a trailing stop.

Non-ADX 1,2,3,4 Bullish on October 7, 2016

Stock must be above its 50-day moving average. Three consecutive lower lows or any combination of 2 lower lows and an inside day. For the buy: tomorrow only, buy 10 cents above today's high. Initial stop: near today's low. Thereafter, use a trailing stop.

Both the short-term and long-term trends are positive. This is a very positive sign.

LVS is part of the entertainment and services industry. There are 19 other stocks in this industry. LVS outperforms 89% of them, according to ChartMill. LVS is currently making a new 52-week high. This is a strong signal. The S&P 500 Index is trading in the upper part of its 52 week range, but not near new highs, so LVS is leading the market.

LVS is currently showing a bull flag pattern. A bull flag pattern occurs when prices pull back slightly after a strong rise up. This may be a nice opportunity for an entry. LVS has an average volume of 3923090. This is a good sign as it is always nice to have a liquid stock.

Looking at its relatively good yearly performance, LVS did better than 85% of all other stocks. SMA(20), SMA(50), SMA(100), and SMA(200) indicators all signal an uptrend.

(Source: Chartmill)

Support/Resistance Analysis. When analyzing the support, we can see 5 important areas:

  • A support zone ranging from 57.73 to 59.08. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames.
  • Support @56.27 from a horizontal line in the daily time frame.
  • A support zone ranging from 54.38 to 55.13. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames.
  • A support zone ranging from 50.32 to 50.76. This zone is formed by a combination of multiple trend lines in multiple time frames.
  • Support @46.50 from a trend line in the weekly time frame.

(Source: Chartmill)

Setup Analysis. LVS has an excellent technical rating and also presents a decent setup pattern. We see reduced volatility while prices have been consolidating in the most recent period. There is a resistance zone just above the current price starting at 59.08. Right above this resistance zone may be a good entry point.

Seasonality

Over the next 13 weeks, Las Vegas Sands Corp. has on average historically risen by 3% based on the past 12 years of stock performance.
Las Vegas Sands Corp. has risen higher by an average 3% in 7 of those 12 years over the subsequent 13 week period, corresponding to a historical probability of 58%
The holding period that leads to the greatest annualized return for Las Vegas Sands Corp., based on historical prices, is 1 week. Should Las Vegas Sands Corp. stock move in the future similarly to its average historical movement over this duration, an annualized return of 38% could result.

Fundamentals

The current ROE for Las Vegas Sands is 22.12%, indicating LVS is currently functioning with high financial efficiency. Return on equity is a measure of financial efficiency, gauging how much profit a company is able to generate from the company's financial net worth (i.e., assets minus liabilities).

Las Vegas Sands is also growing its share of market EBITDA in Macau. According to the company's Q2 earnings presentation, it has grown its market share of total EBITDA to around 38%. (EBITDA is a standard valuation metric standing for earnings before interest, taxes, depreciation and amortization.)

The current dividend yield for Las Vegas Sands is about 4.9%, with last quarter's EPS growth at 15.56%.

LVS Stock Dividend Data

Dividend yield: 4.93%, annualized payout: $2.88, paid quarterly. Payout ratio: 131.5% on EPS of $2.19. Dividend growth: 3 years since 2013.

Analysts' Recent Evaluations

Las Vegas Sands stock was upgraded to "buy" from "neutral" in a note released at Bank of America/Merrill Lynch. The firm increased its price target to $63 from $52 on shares of the Las Vegas-based casino operator. The stock is under-owned, and consensus estimates will likely move higher in coming quarters, BofA/Merrill Lynch said.

Las Vegas Sands' strengths such as its solid stock price performance, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures outweigh the fact that the company has had somewhat weak growth in earnings per share.

Several other research analysts also recently weighed in on the stock. Stifel Nicolaus upped their target price on shares of Las Vegas Sands Corp. from $56.00 to $61.00 and gave the company a buy rating in a research note on Thursday, September 8th. Citigroup Inc. restated a buy rating and issued a $62.00 target price on shares of Las Vegas Sands Corp. in a research note on Wednesday, September 14th. Argus upgraded shares of Las Vegas Sands Corp. from a hold rating to a buy rating and upped their target price for the company from $56.54 to $67.00 in a research note on Wednesday, September 14th. Eleven equities research analysts have rated the stock with a hold rating, eleven have issued a buy rating and one has given a strong buy rating to the stock. The stock has a consensus rating of Buy and a consensus price target of $55.63.

Institutional Investor Activity

Institutional investors have recently made changes to their positions in the stock. Pinkerton Retirement Specialists LLC bought a new position in shares of Las Vegas Sands Corp. during the second quarter worth about $119,000. Seven Bridges Advisors LLC raised its position in shares of Las Vegas Sands Corp. by 45.8% in the second quarter. Seven Bridges Advisors LLC now owns 2,728 shares of the casino operator's stock worth $119,000 after buying an additional 857 shares in the last quarter. Assetmark Inc. raised its position in shares of Las Vegas Sands Corp. by 10.6% in the second quarter. Assetmark Inc. now owns 3,069 shares of the casino operator's stock worth $133,000 after buying an additional 293 shares in the last quarter. Americafirst Capital Management LLC bought a new position in shares of Las Vegas Sands Corp. during the second quarter worth about $181,000. Finally, Bellwether Investment Group LLC bought a new position in shares of Las Vegas Sands Corp. during the second quarter worth about $186,000. Hedge funds and other institutional investors own 37.88% of the company's stock.

Conclusion: Based on the data and what's going on, LVS could be a winner in the medium- to long-term, while providing at least a few decent dividend payments along the way.

Footnote:

CNBC's Jim Cramer on Macau

Click to enlarge

(Image source: CNBC)

A dealer handles gaming chips at a baccarat table inside the Venetian Macau resort and casino, operated by Sands China Ltd., a unit of Las Vegas Sands Corp., in Macau, China.

Disclosure: I/we 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.