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Published: November 17, 2009
In Las Vegas, they say the house always wins.
But that's about to change. In an industry with few dividend
payers, Wynn Resorts (Nasdaq: WYNN) is changing the
paradigm.
Wynn recently announced that its board approved a $0.20 per
share quarterly dividend. The first payment will be declared
sometime in the first quarter of 2010 and payable in the second.
Wynn also declared a $4 a share special dividend. The stock is
trading "ex-dividend" for the special distribution today, which
means the payout won't affect shareholders who buy today. (When
a stock goes ex-dividend, its price drops to account for the
dividend.)
If you took my advice in this
Investor Update article, you already bought Wynn and are
set to collect your $4 per share paycheck -- which will be a
nice bonus on top of the +22% gain you've enjoyed since then.
But if you missed out on this special dividend, don't fret.
There may be more dividend jackpots in Wynn's future.
As I noted in the article, the casino sector still faces some
strong headwinds. But Wynn's dividend announcement is a tangible
and optimistic sign that recovery may be within reach.
Before the economic downturn, casinos were known for generating
strong cash flows, a key ingredient for dividend stocks. And
there used to be a number of dividend payers in the sector. But
less than two years ago investors lost access to Harrah's
Entertainment and Station Casinos dividends when both companies
were taken private. In early 2008, Boyd Gaming (NYSE: BYD)
suspended its dividend to preserve capital during the economic
downturn.
Although the casino sector is
still challenged, cash is beginning
to flow more freely. In its most
recent quarter, Wynn generated
$275.5M in total cash flows from
operations -- +83.9% more than the
same quarter a year ago and a
+148.4% improvement over the
previous quarter. That's more than
ten times what it will need to
service the quarterly dividend
distribution.
Wynn was still carrying roughly $4
billion of long-term debt on its
balance sheet in the third quarter.
But since that time, the company
raised $1.6 billion in an IPO
representing a 20% interest in its
Macau properties. And Wynn's $1.1
billion in cash, roughly $9 per
share, on the balance sheet is a
more than adequate buffer.
Wynn's quarterly dividend amounts to
a modest 1.2% yield. But investors
who captured the special dividend
boosted their yield north of 6%.
Even if you missed the current
special dividend, you may still have
a chance at scoring an above-average
yield with Wynn.
In both 2006 and 2007, Wynn issued a
special $6 per share dividend. In
2008, no special dividend was paid
in an effort to preserve capital
given the challenges in the credit
market and economy. But now that
Wynn has reinstituted its year-end
jackpot, the odds of a special
dividend in 2010 and beyond may be
in your favor.
And if Wynn's announcement truly is
the signpost of the turnaround,
investors may well enjoy solid gains
along with their distributions.
-- Amy Calistri
Editor
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