How Does MGM Resorts International (NYSE:MGM) Fare As A Dividend Stock?
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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the last few years MGM Resorts International (NYSE:MGM) has paid a dividend to shareholders. Today it yields 1.8%. Should it have a place in your portfolio? Let’s take a look at MGM Resorts International in more detail.
See our latest analysis for MGM Resorts International
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will it have the ability to keep paying its dividends going forward?
How does MGM Resorts International fare?
The company currently pays out 56% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 30% which, assuming the share price stays the same, leads to a dividend yield of 1.9%. However, EPS should increase to $1.24, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view MGM Resorts International as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, MGM Resorts International produces a yield of 1.8%, which is on the low-side for Hospitality stocks.
Next Steps:
Taking all the above into account, MGM Resorts International is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for MGM’s future growth? Take a look at our free research report of analyst consensus for MGM’s outlook.
Valuation: What is MGM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MGM is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.
