1 Great Dividend You Can Buy Right Now

Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low, it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say that these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week's selection.

This week, we'll turn out attention to the gambling sector to a company that has been anything but a gamble for investors, Las Vegas Sands (NYSE: LVS  ) , and discuss why it makes for an excellent dividend stock you can buy right now.

Always bet on red
The knock against the casino sector is twofold. First, the capital investment needed to build resorts and casinos is phenomenally high, which often puts casinos deeply into debt. If the cash flow is there and the equity level is high, this isn't a problem. In other cases it's downright scary. Take Caesars Entertainment (NASDAQ: CZR  ) , for example, which has roughly $19.5 billion in net debt and could have trouble keeping up with its interest payments if it takes on any additional debt.

The other knock against the sector is merely that it's cyclical and prone to downswings – especially for the casino operators relying heavily on the currently stagnant U.S. market. MGM Grand (NYSE: MGM  ) is an example of a casino operator that's expanded into Macau but still derives the majority of its business from the United States. Unsurprisingly, it hasn't turned an annual profit since 2007 and isn't expected to until at least 2015.

Competition can also be a bit of a concern for Las Vegas Sands. Wynn Resorts (NASDAQ: WYNN  ) presents formidable competition in Macau because of its attractiveness to upper-income earners. Also, the prospect of legalized online gaming could put Las Vegas Sands at a distinct disadvantage, since its CEO, Sheldon Adelson, has no desire to align his company's plans for such a future. Should online gaming be legalized, social-media dud Zynga (NASDAQ: ZNGA  ) could become a stud with the infrastructure already in place to help reap the rewards of the $36 billion global online gaming industry. Then again, without online gaming, Zynga is a muddled mess ... but that's an entirely different story altogether.


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Doubling down on Las Vegas Sands
Luckily for Las Vegas Sands' shareholders, you can take these concerns and shove them under the baccarat table.

The company's first-quarter results were an all-time record for any quarter -- ever! Keep in mind that both China and the U.S. are growing GDP at rates below their historical averages, yet Las Vegas Sands is reporting record revenue and profits. The standout for the quarter continued to be its Macau properties, which delivered a 51% increase in EBITDA. Singapore also added nicely to gains, with EBITDA in that region up by 16%.

By contrast, Wynn Resorts, which had dominated Macau for years, has struggled. Wynn's most recent quarter did point to a 4% gain in Macau revenue, but this came at the expense of a 15% decline in in VIP table game turnover. The secret to Las Vegas Sands' sudden success in China has to do with its appeal to a broader income audience, not just upper-income earners. As China, India, and other emerging markets see affluence levels in their middle class rise, Las Vegas Sands is providing the ability for these people to experience affordable luxury, which Wynn simply doesn't offer.

Another factor to consider is that Las Vegas Sands is still reasonably priced even at 18 times forward earnings because of its rapid Macau growth. Expectations from the Street are for 21% sales growth this year and an average of nearly 14% over the coming five years. I'd consider this more than adequate growth to support an even higher multiple.

Show me the money, Las Vegas Sands
Believe it or not, the most intriguing aspect of Las Vegas Sands is the casino operators' amazing payback. Casinos are often viewed as nothing but money-hungry entities that offer us little chance to win, but I think the best way to win with Las Vegas Sands is by purchasing its stock.

The first way Las Vegas Sands takes care of its shareholders is through a share-repurchase program, which it approved last week. The initial $2 billion sum will be used to "maximize returns to shareholders in the years ahead," according to CEO Adelson. While share buybacks don't put money directly into shareholders' pockets, it does reduce the number of shares outstanding and make the company appear cheaper on a P/E basis.

The other overlooked aspect of Las Vegas Sands is its growing dividend. It's easy for income seekers to overlook the company, because it began paying a dividend only in March of last year. However, Las Vegas Sands has already boosted that quarterly payout by 40% to $0.35 from $0.25 and now yields an annualized and respectable 2.4%. Furthermore, the company also distributed a special dividend of $2.75 in December, returning a grand total of $3.1 billion to shareholders in 2012!

I wouldn't get too used to exceptionally large special dividends like the ones we witnessed last year, but I think that with a payout ratio of 50%, it gives income investors more than enough incentive to expect consistent, or perhaps even slightly higher, dividends in the future while still leaving Las Vegas Sands ample cash to reinvest in Macau and other overseas opportunities.

Foolish roundup
Las Vegas Sands' business model might revolve around gambling, but its stock appears to be anything but the sort. Appealing to a larger income class of people and positioned in the highly profitable Macau market, Las Vegas Sands is hitting all the right chords with gamblers and investors around the globe. With its double-digit growth rate, a rapidly growing dividend, and a share-repurchase program focused on boosting shareholder value, I think you have all the makings of a company that could help you hit the jackpot.

Macau, for the win?
For many companies, successfully capitalizing on a booming Chinese economy is like winning the jackpot. That's indeed the case for gaming company Las Vegas Sands, which made a big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread its empire further, but will it be able to replicate its prior successes? Learn about all these opportunities, and the risks they pose, in our premium report on Las Vegas Sands. Be sure to claim your copy today by clicking here.


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