Several here continue to talk about dividends, even the Sterne Agee guy. Ho suggested on the last two calls they would review policy in due course by end of year. Yesterday he said they would review it early next year... but read the transcript, he also said they were dialed into what their institutional shareholders are thin king on the topic.
We and other pm in these shares could care less about getting a dividend on this stock. We think the company has been brilliant generating ebitda growth such that the company has been able to take on manilla without raising equity capital or overly burdensome debt to complete the project. Ditto for jumping into Tower 5 in recent months. After that, Japan and other Asian ideas will be in the mix... THE LAST THING PROFESSIONAL MM want is to be diluted with an equity raise to do these projects.
So, now that EPS is coming up fast and ebitda is still growing north of 50% YOY despite the development costs being absorbed and having the presently limited footprint, the distribution of capital -- as if they have nothing of interest to use it for -- would be very shortsighted. Ho and his team understand all of that...and we and the rest of the significant pm in these shares will be very surprised to see a common stock dividend any year soon.
For those of you not interested in the growing earnings yield, ebitda/share and discounted valuation relative to peers (i.e., buying the stock for coming growth and because it is cheap vs the group) -- and who think that dividends are a great idea, you really ought to be focused on LVS in the gaming sector. Shel's family and estate plan is focused on aggressive distributions via regular and special dividends...
Some make-up reading for those who weren't around last year...
Again, I am not saying they won't pay a dividend anytime soon, just that it is not something a high level finance team would consider at this point in MPEL's rapid resort development phase. for the next 2+ years, as evidenced by their recent debt financing for COD Manila, they need more deployable capital (coming from ebitda growth), not to figure out what to do with excess capital (which, if they had it, should be used to buyback stock, NOT to sign up on a regular dividend).
They understand this and have said so in plain and sophisticated terms in various venues. In sum, it makes no sense sense to pay a commong dividend now from a corporate finance perspective, a point that the pm sponsorship has emphasized with management and that mgmt continues to address in plain terms on every conference call and investment conference.
Read the thread in chronological order for various points/ counterpoints... but go buy LVS or WYNN if you want a dividend... we own LVS too, but the primary gaming allocation is right here on the fastest growth and best mgmt execution.
As a follow up to my comments on this thread, MPEL just priced a $340m debt financing at 5% capex for COD Manila. Tower 5/Studio City will also require further debt financing...
Those advocating a common dividend here, including any analysts, must not be doing legit spreadsheet analysis, and or they must have incredibly optimistic ebitda growth assumptions (with only COD Manila changing the footprint for the next 3.5+ years)... or they think MPEL is going to come with equity issuance. The latter would clobber the stock in our view' market cap would likely be clobbered by a bunch more than the equity capital raised.
Everyone can do their own thinking, but fear of an equity raise (vs using cash flow and ebitda) to pay for footprint expansion will clobber these shares, and if you do the math on a common dividend, it makes no sense for this company, in rapid IR expansion mode for the next 3 years and then taking say another 2 years to get all of the new plant ripping on ebitda, to issue incremental debt to initiate common dividends. Those reading our thoughts for a couple years know this is a three year old concept for us, the shareholder base and MPEL execs building their net worth.
Again, we would be surprised and disappointed to see them start a dividend -- and so would eveyone we know long serious shares here...
squeeze, thanks for sharing.....and thoughts on lvs with today's news out that lvs is dropping Spain deal and focusing in on their Asian interests....perhaps, Japan.....this too is a positive....glut goos.
Sentiment: Strong Buy
As you know, we did not like the "Spanish Empire" idea from the start. You can start at 50% unemployment for the 30 and unders and broader Spanish economy/budget malaise, move on to the general EU mess which has improved but not much and no momentum to speak of (see Germany's data this week), and then cruise right on into the concept that LVS would need to pal up with the checkwriters in Merkel's administration and curtail flexibility to do other things with ramping cash flow... all together, yuck.
We have not owned LVS since the stock ran up to $59 before pulling back to low $50s, but pulling the plug on spain is certainly a tremendous positive in our minds. We know we were not alone -- many pm in the sector were more vocal than us with the company... but I am close to certain the rating agency review over the last couple months also played a role. Spain was a bad idea from the start, and at least they had the wisdom to stop before spenind the $30B or more the project would have required as investment allocation.
The great news for LVS shareholders is that now LVS has significantly more flexibility in Asia (incl Japan) and ATM money (special and common dividends) for LVS shareholders.
ebitda and eps growth are what pm want from this mgmt team, not a dividend. As good as the Strene Agee analyst is, he continues to struggle on this. Those who still do not understand should ask themselves if they think a small dividend, the payment of which necessitates doing an offsetting equity, is going to happen. It is not. Read the top again and then listen to/read Ho's remarks on the topic one more time.
I disagree squeeze regarding dividends. I think they'll pay one. Ho said he and Packard had put a lot of money in, and have never taken any out.....I think with the cash flow, they'll be able to do something along what the Sands and Wynn do. Dividends are a BIG part of the long term return...see below: But, I see your point as well, if they don't pay one, that will be ok as well.
Clipped from source quoted at the end:
Over the long term, dividends have been critical to total return. From the end of 1929 through March 2012, reinvested dividends provided almost half of the S&P 500 Index’s total return, or a 9.4% annualized return versus a 5.2% return for price appreciation alone. These results are striking in dollar terms. Hypothetically, a $100 investment made at the end of 1929 would have become $6,566 by the end of March 2012 based on price change alone. However, when adding the compounding effect of dividends, the same hypothetical $100 investment would have become $162,925. 1 The equity value is 24.8 times greater at the end of the period because of the yield component. Examining a more recent time frame, from the end of 1979 through the end of March 2012, the S&P 500 with reinvested dividends turned $100 into $3,145, compared to only $1,305 from price change alone. 1 Over the long term, dividends have a meaningful impact on total return.
Dividends: A Timeless Component of Equity Return
By Richard Skaggs
April 18, 2012