Las Vegas Sands Corp. (NYSE:LVS) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Las Vegas Sands investors that purchase the stock on or after the 5th of November will not receive the dividend, which will be paid on the 13th of November.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Based on the last year's worth of payments, Las Vegas Sands has a trailing yield of 1.9% on the current stock price of US$52.93. If you buy this business for its dividend, you should have an idea of whether Las Vegas Sands's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Las Vegas Sands paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Las Vegas Sands generated enough free cash flow to afford its dividend. Fortunately, it paid out only 31% of its free cash flow in the past year.
It's positive to see that Las Vegas Sands's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Las Vegas Sands's earnings per share have fallen at approximately 7.5% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Las Vegas Sands has seen its dividend decline 3.3% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
The Bottom Line
Is Las Vegas Sands worth buying for its dividend? Las Vegas Sands has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Las Vegas Sands looks okay on this analysis, although it doesn't appear a stand-out opportunity.
In light of that, while Las Vegas Sands has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Las Vegas Sands has 2 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
