Sands China, Wynn Macau Not Pressured to Resume Dividends

Posted on: May 23, 2023, 04:22h. 

Last updated on: May 25, 2023, 05:57h.

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

The three Macau concessionaires controlled by US-based casino operators aren’t under pressure to resume dividend payments to their parent companies over the near term, according to a major global ratings agency.

Las Vegas Sands
The Venetian Macau. US-based Macau operators don’t need to resume dividends anytime soon, says S&P. (Image: Bobby Yip/Reuters)

S&P Global Ratings director of corporate ratings Melissa Long and Associate Director of Corporate Ratings Aras Poon conducted a webinar Tuesday in which they said MGM China, Sands China, and Wynn Macau don’t need to imminently restart dividends to their Las Vegas-based parent companies. Those are Las Vegas Sands (NYSE: LVS), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN).

We don’t really see any pressure or need to upstream dividends from Macau to [the US] parent companies,” observed Long. “In fact, we’ve made some assumptions around potential future dividend resuming in 2024, assuming cash flow recovers in line with our base case forecasts. But that’s an assumption that we’re making and none of the operators have spoken about resuming dividends … from Macau.”

The commentary from the S&P analysts arrived as their counterparts at JPMorgan forecast that Macau casino operators will likely generate at least $2 billion in gross gaming revenue (GGR) this month. That tops the totals posted in March and April, while pacing for a new post-pandemic high.

US Macau Parents Don’t Need Dividends

Prior to the coronavirus pandemic, MGM China, Sands China, and Wynn Macau paid dividends to their US-based parents, delivering an important, steady source of cash to the majority owners.

Those payouts were scrapped to conserve cash amid the global health crisis. Today, Macau operators are focusing on generating cash flow and rehabilitating balance sheets, as the special administrative region’s (SAR) gaming industry rebounds from a multiyear slump.

Specific to MGM, Sands, and Wynn, the good news is that none of those operators is in dire need of cash from their Macau subsidiaries. Buoyed by strength at their Las Vegas Strip venues, MGM and Wynn are generating cash, while Marina Bay Sands in Singapore is supporting Sands’ firming balance sheet. S&P’s long also highlighted the operators’ various domestic and international expansion opportunities as potential long-term drivers.

“Sands with New York and Singapore; MGM with Japan and New York; and Wynn, in addition to the New York casino possibility …  got an expansion in Boston [Massachusetts] and is pursuing an integrated resort development in the UAE,” said the analyst.

US Dividend Outlook Still Not Great

Among the aforementioned trio, Wynn is the only dividend payer of note, having announced earlier this month it will soon restart its quarterly payout at 25 cents a share.

MGM pays a meager annual dividend of just one penny per share following a pandemic-induced cut in 2020. The operator has been a significant buyer of its owner stock over the past couple of years.

That leaves Las Vegas Sands. Once the dividend darling of the gaming industry, its payout was suspended in 2020. Following a recently amended agreement with creditors, it’s unlikely LVS will restart its dividend prior to 2025.