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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Las Vegas Sands Corp. (NYSE:LVS) has paid dividends to shareholders, and these days it yields 5.2%. Let’s dig deeper into whether Las Vegas Sands should have a place in your portfolio.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Las Vegas Sands pass our checks?
The current trailing twelve-month payout ratio for LVS is 98%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 87%, which, assuming the share price stays the same, leads to a dividend yield of 5.5%. In addition to this, EPS should increase to $3.18, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Las Vegas Sands as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Las Vegas Sands has a yield of 5.2%, which is high for Hospitality stocks.
If you are building an income portfolio, then Las Vegas Sands is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for LVS’s future growth? Take a look at our free research report of analyst consensus for LVS’s outlook.
- Valuation: What is LVS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LVS is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.