MGM China, Wynn Macau Deliver Unexpected Special Dividends

Posted on: March 22, 2024, 02:35h. 

Last updated on: March 25, 2024, 11:45h.

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

Heading into 2024, it was widely expected that most, if not all, of the six Macau concessionaires would delay the resumption of dividends. It was expected  to fortify their balance sheets and conserve capital for government-mandated nongaming expenditures.

Macau stocks
Wynn Palace in Macau. Operator Wynn Macau and rival MGM China surprisingly announced dividends. (Image: Bloomberg)

MGM China and Wynn Macau, the Macau arms of MGM Resorts International (NYSE: MGM) and Wynn Resorts (NASDAQ: WYNN), delivered surprise dividend announcements on Thursday, announcing their first payouts since 2019. That was the year before the onset of the coronavirus pandemic. MGM China is paying a final dividend for 2023 of 3.07 cents a share, while Wynn Macau is paying 1.33 cents per share.

(The dividend decision) a year earlier than the Street had expected,” wrote JPMorgan analysts in a note to clients.

Entering this year, it was widely believed that the three U.S.-based Macau operators — MGM China, Sands China, and Wynn Macau – weren’t under pressure by investors or regulators to resume payouts. That could indicate that the MGM China and Wynn Macau dividends signal confidence in the Macau recovery, as well as their ability to manage debt.

And Then There Were Three Macau Dividend Payers

With the announcements from MGM China and Wynn Macau, along with the recent update of the same news from Galaxy Entertainment, three of the six Macau concessionaires now pay dividends.

The JPMorgan analysts said of the other three operators, Sands China is the most likely to follow suit, with that action coming at some point next year. That leaves Melco Resorts & Entertainment (NASDAQ: MLCO) and SJM Holdings as the least likely to resume dividends over the near term. Those two operators are likely to focus on deleveraging over the medium term.

Under newly enacted Macau gaming laws, casino companies must hold a minimum of $625 million and notify regulators of plans to distribute cash to shareholders.

Previously, Sands China and Wynn Macau needed consent from creditors to restart dividends. Agreements between operators and lenders featured clauses requiring the gaming companies to meet certain liquidity requirements before restarting payouts.

LVS, Wynn Restarted US Dividends

In the U.S., Wynn restarted its dividend last May while Las Vegas Sands followed suit last July. MGM is focused on share buybacks as its primary form of returning capital to investors. Speaking of Sands, the company recently said at the JP Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum that the Londoner Macau could generate earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.5 billion to $1.7 billion once renovations are completed.

That’s well ahead of the property’s current EBITDA range of $700 million to $800 million. Sands China devoted $3 billion to enhancing the venue to target high-end clients. The second phase of renovations there is slated to be finished in advance of Chinese New Year 2025.

JPMorgan also expects Sands to add more rooms at the highly profitable Venetian Macau. The bank noted the special administrative region (SAR) is undersupplied when it comes to guest rooms and table games.