Melco Crown (NASDAQ:MLCO) has been paying a dividend for less than a year, but it's already one of the most attractive dividends in the gaming industry. The company runs an incredibly profitable resort in Macau, has two more under construction, and could grow into a number of emerging gaming markets in Asia and abroad.

These strong operations, along with a balance sheet that's the envy of the gaming industry, make it a top dividend not only in the gaming industry, but in the stock market as a whole. 

City of Dreams in Macau is Melco Crown's flagship resort. Source: Melco Crown.

Strong cash flow from Macau

A vast majority of Melco Crown's current cash flow comes from City of Dreams in Macau. Over the past year, the resort has generated $1,255 million of EBITDA -- a proxy for cash flow -- out of $1,376 for the entire company.

Cash flows from this resort is what's being used to pay Melco Crown's dividend. Even as Macau's gaming revenue has fallen recently, cash flow has remained high because gaming revenue is well above the resort's operating expenses.

Management would like to use 30% of its earnings for dividends in the future and that means a decent dividend yield, currently around 1.2%, and the ability to retain earnings for future growth. 

A balance sheet the envy of the industry

Building casinos has long been a highly leveraged business, at least until Macau came along. Companies would borrow hundreds of millions, or even billions of dollars, to build megaresorts with the promise of rewarding shareholders with leveraged returns if the casino produced more cash than it cost to pay back debt holders.

An image of the next tower at City of Dreams. Source: Melco Crown.

But Macau's casinos generate so much cash that companies no longer need to use the same kind of leverage. Melco Crown has $3.6 billion of total cash on the balance sheet and just $3.7 billion in long-term debt. If management wanted to, it could be debt free by the end of 2015 and still complete Studio City in Macau and the resort in The Philippines.

That solid balance sheet reduces risk that Melco Crown's business and dividend will be devastated by a downturn in its gaming business, reducing potential volatility for investors. It also means cash generated from operations can be paid to shareholders even while pursuing available growth opportunities.

An opportunity for future growth

Macau is going through a bit of a rough patch right now, but long term, I think it will recover, and Melco Crown's earnings will grow steadily as it does. But the bigger opportunity for dividend growth is in markets like the Philippines and Japan.

Melco Crown is currently building a joint venture resort in the Philippines that, at today's price, is barely being acknowledged by the market. Its impact once opened mid next year is unknown, but the Philippines had $2.2 billion in gaming revenue last year, and that's just at the beginning of gaming resorts open in Manila Bay.  

Japan is a market every major casino operator is after, and Melco Crown may be able to sell its development prowess and strong balance sheet to win a bid, or at least partner with another developer there. If it can build a presence in Japan, it's possible revenue and earnings could double by adding a single resort. 

Macau and the Philippines are only the beginning for Melco Crown, and as the company grows, so should its dividend.