Boyd Reinstates, Boosts Dividend, Among First Casino Companies to Do So

Posted on: February 4, 2022, 12:54h. 

Last updated on: February 4, 2022, 02:04h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Boyd Gaming (NYSE:BYD) reported consensus-beating fourth-quarter results on Thursday. But the real surprise for investors may be the company reinstating and hiking its quarterly dividend.

Boyd Gaming Orleans
Boyd Gaming’s Orleans casino resort in Las Vegas, seen above. The operator is bringing back and increasing its dividend. (Image: Twitter)

In becoming one of the first casino operators to not only bring back its payout – but also raise it following a spate of cuts and suspensions in 2020 due to the coronavirus pandemic – the Orleans operator said its new quarterly dividend will be 15 cents a share, or 60 cents a year. That’s good for a yield of about one percent, based on the Feb. 3 closing price.

Boyd Gaming’s Board of Directors approved the reinstatement of a regular quarterly dividend, starting in the second quarter of 2022. The quarterly cash dividend of $0.15 per share will be paid on April 15, 2022, to shareholders of record as of March 15, 2022,” according to a statement issued by the Las Vegas-based company.

In March 2020, the Aliante operator suspended its dividend, which at that time was seven cents a share per quarter. Boyd wasn’t the only dividend offender in the gaming industry during the darkest days of the pandemic. Far from it. However, it is the first to reinstate its dividend, though rival Red Rock Resorts (NASDAQ:RRR) announced a $3 a share special dividend last November.

Start of Trend? Either Way, Analysts Like the News

It remains to be seen if Boyd resuscitating its payout motivates rivals to do the same. Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN) are among the most notable casino operators that suspended or slashed dividends in 2020 that have yet to alter that policy.

For its part, Boyd has the resources to support shareholder rewards, as it concluded 2021 with $344.6 million in cash on hand. Additionally, prior to the pandemic, the company had a reputation for dividend growth. It restarted its payout in 2017 at five cents a share per quarter, and by mid-2019, it had grown 40 percent.

Bolstering the Boyd investment thesis is stellar free cash flow generation and the point that shares are undervalued.

“With BYD shares showing an ~10 percent FCF yield, we believe it’s a matter of time before investors catch on and understand shares remain undervalued when compared to peers,” writes Stifel analyst Steven Wieczynski in a note to clients. “You have a company that has a massively underlevered balance sheet, strong core fundamentals, real estate optionality and a call option around sports betting, yet trades at a discount to certain peers.”

He reiterates a “buy” rating on Boyd while moving his price target to $90 from $85. That new forecast implies upside of about 50 percent from the Feb. 3 close.

Boyd Buyback, Too

Share repurchase programs are making comebacks in the gaming industry, and Boyd is participating in that trend. Last October, the company announced a $300 buyback plan. Combined with previous repurchase programs, the operator, at that time, had $361 million to direct toward buying its own shares.

Wieczynski said Boyd should return about $500 million to investors this year when accounting for buybacks and dividends.

“We believe BYD should trade more around a six percent to seven percent FCF yield which would indicate shares are worth $80-$100. Core trends remain encouraging across the portfolio, and it seems like their customer base continues to visit and spend at a healthy pace,” adds the analyst.