las vegas sands

Las Vegas Sands Corp. (NYSE:LVS), the casino operator led by billionaire Sheldon Adelson, announced Monday that it will distribute about $2.26 billion to shareholders. The company will give special dividend of $2.75 a share on December 18 to shareholders on record on December 10.

In a conference call on November 1, chairman Sheldon Adelson said, “We have every intention of increasing the dividend in the years ahead as our business and cash flows continue to grow. I can say only one thing about that: Go Dividend.” The company has increased its annual dividend by 40 percent to $1.40 per share.

Las Vegas Sands Corp. (NYSE:LVS) is the latest company to provide a special end-of-the-year dividend and to increase the payout. It will protect investors from paying higher taxes on their dividends, ‘when’ the fiscal cliff becomes effective in January next year. Investors have been paying a maximum of 15 percent tax on dividend income since 2003. But the taxes will rise in January unless the fiscal cliff is prevented. 2013 onward, dividends will be taxed as ordinary income, so the tax rates will go higher depending on which income bracket a shareholder falls in.

The rival of Las Vegas Sands Corp. (NYSE:LVS), Wynn Resorts, Limited (NASDAQ:WYNN), last month declared a $7.50 per share dividend payout. Retailer Costco Wholesale also announced today a special dividend of $3 billion to investors.

Las Vegas Sands owns casinos in Las vegas, Pennsylvania, Singapore and Macau. As of November 1, the company has 823.4 million outstanding shares, of which 431.5 million or 52 percent were owned by its founder chairman Sheldon Adelson, according to FactSet. Based on his holdings, Adelson alone with receive $1.19 billion in special dividend payments. LVS shares rose 5.3 percent to $46.37 in New York trading, highest since July 19. The stocks are up 8.5 percent this year so far.

Robert LaFleur, an equity analyst at Cantor Fitzgerald said in a research report that if you look at the gaming industry, especially U.S.-based casino companies, through the prism of product life cycle theory, the casino business is making a transition from the growth phase to maturity phase.

He analysed Penn National Gaming, Inc (NASDAQ:PENN)’s recent REIT transaction and LVS’s special dividend. LaFleur thinks that casinos are the bulk producers of free cash flow. Initially, this cash was redirected to growth as Las Vegas Sands Corp. (NYSE:LVS) boomed. But now the gaming landscape appears saturated, and much of growth in emerging markets comes at the expense of the already established markets.

Therefore, Cantor Fitzgerald thinks that return of capital to investors through dividends will be an increasing theme of gaming operators. Cantor Fitzgerald maintains its hold rating for Las Vegas Sands.