MGM, Penn Among Contributors to Casino Stock Buyback Bonanza

Posted on: May 19, 2022, 12:44h. 

Last updated on: May 19, 2022, 01:53h.

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

Led by MGM Resorts International (NYSE:MGM) and Penn National Gaming (NASDAQ:PENN), among others, casino stocks are prime territory for share repurchase programs.

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MGM’s Mandalay Bay Las Vegas. The operator is leading casino industry share buybacks. (Image: YouTube)

Gaming industry shareholder rewards, including buybacks and dividends, were halted in the early days of the coronavirus pandemic. But casino operators and gaming suppliers are back at the buyback well in force.

More gaming stocks announced buyback plans in the past nine months than in any comparable period in 10+ years,” says Roth Capital analyst Edward Engel in a note to clients today. “Among US-listed companies, 12 gaming operators/suppliers authorized repurchase plans since August 2021, including a flurry of announcements this month.”

Since last August, domestic gaming companies announced $5.7 billion worth of share repurchase plans. Corporations, regardless of industry, often embrace buybacks because this method of rewarding investors offers flexibility. Simply because a company announces a repurchase effort, that doesn’t mean it has to follow through on the entire dollar amount. Additionally, companies can buy their shares at any time, which is significantly less rigid than quarterly dividend payments.

Casino Stock Buyback Binge Has More in Tank

MGM Resorts, the largest operator on the Las Vegas Strip, has been a voracious buyer of its own shares since last year. And like some of its rivals, it has plenty more to go on authorized repurchase plans.

“12 gaming operators/suppliers have announced buyback programs since August 2021, with aggregate authorizations approaching $5.7bn. For operators that announced buybacks, remaining authorizations represent 11% of market caps, on average,” adds Engel.

According to Roth Capital data, the new operator of the Cosmopolitan has $2.24 billion left on its repurchase program. Gaming supplier Light & Wonder (NASDAQ:LNW) has nearly $700 million left, while Penn National has $600 million remaining on a previously announced buyback plan.

In terms of remaining dollars on buyback authorizations, Churchill Downs (NASDAQ:CHDN) and Bally’s (NYSE:BALY) round out the top five at $421 million and $335 million, respectively.

Three operators with significant Las Vegas locals exposure – Boyd Gaming (NYSE:BYD), Golden Entertainment (NASDAQ:GDEN), and Red Rock Resorts (NASDAQ:RRR) – have a combined $269 million left on buyback programs, according to Roth Capital.

As a percentage of market capitalization for remaining repurchase programs, Bally’s is by far the leader at 26%. No other gaming company tops 18%.

Casino Stock Buybacks Preferred to Dividends

At the height of the coronavirus pandemic, gaming operators nixed shareholder rewards to conserve capital. While buybacks are clearly back, dividends are not.

Boyd and Red Rock are among the only operators that restored dividends since 2020. MGM maintains a token payout following a coronavirus-induced cut.

However, Las Vegas Sands (NYSE:LVS) — previously the industry’s biggest dividend payer — and Wynn Resorts (NASDAQ:WYNN) have not resumed payouts, and neither are earnestly participating in the aforementioned industry buyback binge.

On its first-quarter earnings conference call last month, Sands signaled it’s more likely to resume dividends than to turn to buybacks as a method of returning capital to investors.