Gaming giants Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) have both rebounded sharply since the state of gambling activity in Macau has started to pull out of its steep downturn. After years of declines, the two stocks have posted incredibly strong returns over the past year, and investors who are bullish on the Asian gaming capital's prospects think that further gains could come in the future. But which of these companies is the smarter pick right now? Let's take a closer look at Wynn Resorts and Las Vegas Sands to see if we can come up with an answer to that vital question.

Image source: Wynn Resorts.

Valuation and stock performance

It's been a long time coming, but both Wynn Resorts and Las Vegas Sands have seen impressive gains to claw back some of their lost ground from past years. Over the past 12 months, shares of Las Vegas Sands have produced a total return of 49%, which has dramatically outpaced the broader stock market. Wynn's gains have been even larger, with a 71% total return since Nov. 2015.

When you look at the two companies from a simple valuation perspective, you get a picture of the optimism that shareholders have for the future of both companies. From a trailing perspective, the two companies' earnings multiples are quite high. Las Vegas Sands trades at 30 times trailing earnings, while Wynn has a multiple of 47. Yet those trailing results still include some of the weakest periods of the past several years, and looking at near-term projections for future earnings provides a different viewpoint. Las Vegas Sands trades at 23 times forward earnings estimates, while Wynn weighs in at just a slightly higher level of 24. Las Vegas Sands has a slight valuation advantage, but the differences aren't as dramatic as the trailing multiple disparity might lead you to believe.


On the dividend front, however, there's a much clearer answer. Even with its recent share-price advance, Las Vegas Sands still has a strong dividend yield of more than 4.5%. Wynn, by contrast, is currently yielding only 2%.

That difference in the two companies' dividends came as a result of Wynn's decision to cut its previous dividend in early 2015, slashing the amount it paid each quarter by 67%. That move freed up capital that it could then use to finance some of its new projects, including both another property in Macau and its proposed Boston-area casino and resort property. It also brought Wynn's dividend payout ratio below the 100% mark, a decision that should put the gaming company in a better position to sustain its current dividend level indefinitely. By contrast, Las Vegas Sands has kept its higher dividend yield even amid earnings pressure that might have justified a similar payout cut, showing its commitment to shareholders.

If Sands can grow its earnings in the aftermath of the Macau downturn, then those payout ratios will come down and arguably justify the current level of its dividend. Wynn will have to supplement its reduced dividend with either special dividend payments or with a future decision to restore its old payout in order to satisfy investors fully.

Growth prospects and risks

There's no doubt that Wynn Resorts and Las Vegas Sands have both made a lot of progress, but there's still work to do. For Wynn, net revenue in its most recent quarter jumped 11%, thanks entirely to the opening of the Wynn Palace property on Macau's Cotai Strip. Comparable figures from the Wynn Macau show the struggles that the company still faces, with net revenue and casino revenue both falling about 11% from year-ago levels. Wynn's presence in Las Vegas has contributed to its performance, with a modest 4% rise in sales producing a 10% rise in adjusted pre-tax operating earnings. However, Wynn will need to see continued success from Wynn Palace in order to demonstrate to investors that its long-term prospects are still good.

Meanwhile, Las Vegas Sands has also seen similar experience lately. In its most recent quarter, net revenue climbed by 3%, with the opening of the Parisian Macao coming late enough in the quarter to have relatively little impact on the overall company's results. Adjusted net income climbed by 8%. Venetian Macao revenue climbed 10%, producing a 23% jump in adjusted property pre-tax operating earnings as occupancy rate increases helped to offset declines in the average daily rate charged. Sands Cotai Central didn't perform as well, suffering a 6% drop in net revenue, but adjusted EBITDA still rose. Elsewhere, the Marina Bay Sands property in the Philippines produced gains in both net revenue and adjusted EBITDA, while its Las Vegas resorts took a slight sales hit of less than 1% but still managed to boost its bottom line on an adjusted basis.

Wynn Resorts and Las Vegas Sands both have promise, but right now, Wynn has slightly greater momentum. If a restoration of the dividend happens or if future growth opportunities surface, then Wynn will be in a stronger position to charge ahead and give investors even more solid returns in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.