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Las Vegas Sands (LVS 0.10%) stock is firing on all cylinders. Shares of the casino operator made lows for the year at around $34 per share in January. As of the time of this writing, Las Vegas Sands stock is up by more than 67% from those levels, trading at fresh yearly highs in the neighborhood of $56. Let's take a look at the main drivers behind this impressive performance from Las Vegas Sands stock, and find out what it could mean for investors in the company going forward.

Industry headwinds

Las Vegas Sands' share price has gone up substantially over the last year, but returns don't look so encouraging in a longer time frame. Back in February 2014, Las Vegas Sands was trading in the area of $85 per share, so the stock is still down by nearly 34% from those highs.

The main problem for Las Vegas Sands and other casino operators with a big presence in Macau is declining revenue due to a changing regulatory landscape. In 2014 the Chinese government started implementing a series of restrictions and visa limitations on VIP gamblers in Macau in order to combat corruption and illegal money laundering via casinos. In addition, government authorities want to make of Macau a more family-oriented destination as opposed to an entertainment retreat based mostly on gaming.

These limitations delivered a massive blow for casino operators in Macau, as gaming demand has been declining since June 2014. Even if there are some signs of improvement lately, monthly gross revenue from games of fortune in Macau is still down by 9.1% in the first eight months of 2016 versus the same period in 2015. The comparison against 2014 is much tougher, with revenue down by a staggering 42% in 2016.

Adding to the concerns, different casino operators have been building additional capacity in the region lately. Competitor Wynn Resorts (WYNN -1.68%) inaugurated its $4.1 billion Wynn Palace casino on Aug. 22, while Las Vegas Sands just opened the $3 billion Parisian resort on Tuesday. This means that two new massive properties are entering the market at the same time.

Building new hotels and casinos takes several years, and many of the new projects in Macau were planned in times when demand was still booming. The fact that supply is increasing when demand is moving in the wrong direction represents a major uncertainty factor for investors in Macau casino stocks.

Reasons for optimism 

The stock market is a forward-looking mechanism. There are clear reasons to believe that demand could be turning around in Macau over the middle term, and investors are trying to anticipate such recovery by bidding up shares of Las Vegas Sands and other Macau casino names.

Monthly revenue for Macau casinos increased 1.1% year over year in August. The increase is not particularly big, but this was the first month with positive year-over-year growth numbers since May 2014.

According to Las Vegas Sands' CEO, Sheldon Adelson, all of the company's properties enjoyed growing mass gaming volume and increasing revenue in June. This has not happened since September 2014, so things clearly seem to be improving for the company.

It's still too early to say that Las Vegas Sands is completely out of the woods, and it's hard to tell what kind of growth the company can deliver in the context of increasing supply in Macau. On the other hand, the early recovery signs are quite tangible, and this is arguably the main reason Las Vegas Sands stock is doing so well.

More room to run

Even after delivering impressive gains over the last year, Las Vegas Sands stock still offers considerable room for gains going forward. The stock is trading at a generous dividend yield of 4.8%. As a reference, the average company in the S&P 500 index offers a dividend yield of 2.3%, and competitor Wynn Resorts pays a dividend yield of around 2%.

This dividend yield looks particularly attractive since it comes from a company with a rock-solid trajectory of dividend payments over the past several years. Las Vegas Sands has increased dividends at an average annual rate of 30.3% from 2012 to 2016. Even while facing big headwinds in Macau, the company hiked dividends by 10.8% last year.

An attractive valuation does not necessarily guarantee that Las Vegas Sands will continue delivering winning returns going forward. Rather, continuing this year's performance will depend on the company's ability to start growing again in the middle term. Nevertheless, the fact that the stock is conveniently priced is a major positive for investors in the company. If the incipient recovery in Macau gains steam, then the stock still offers substantial upside potential from current price levels.