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Gaming Guru

Chris Sieroty
 

Wynn Resorts, others paying special dividends before '13

26 November 2012

By Chris Sieroty

LAS VEGAS -- Wynn Resorts, Limited has joined a long list of companies paying special dividends before the end of the year, to help investors avoid a larger tax bill in 2013. The move comes as Congress scrambles for a solution to avoid some $500 billion in automatic tax hikes and spending cuts in the new year.

As part of the so-called fiscal cliff on Jan 1., a two-year extension of lower dividend tax rates is set to expire. If Congress fails to reach an agreement, the top tax rate on dividends will jump to around 39.6 percent from 15 percent. The tax rate was lowered under 2003's Jobs Growth and Tax Relief Reconciliation Act.

"It's clear that dividends are a good form of savings," Steve Wynn, CEO and chairman of Las Vegas-based Wynn Resorts told analysts and investors in an Oct. 24 conference call. "So the dividend policy of companies are very often affected by tax policies of the government."

Wynn warned when taxes are too high, then companies "don't distribute, the shareholders don't get the dividends and Uncle Sam doesn't get the tax on dividends."

Instead, he said, companies will keep the money and use it for other purposes.

"Sometimes, that's a good policy and sometimes it isn't," Wynn said.

Wynn Resorts on Tuesday paid an $8-a-share dividend, including the regular 50-cent quarterly amount. The special dividend is expected to cost Wynn Resorts $750 million, according to the company.

Las Vegas Sands Corp. recently announced it would return "capital to shareholders through growing annual dividends." The company will increase its dividend in 2013 40 percent to 35 cents per share, per quarter or $1.40 per year.

Sheldon Adelson, chairman and CEO of Las Vegas Sands, told analysts recently the company has every intention of increasing the dividend in the years ahead as the company's business and cash flows continue to improve.

"I can only say one thing about that, go dividends," Adelson said.

Stocks that pay sizable dividends have always been popular with investors, but in recent years their value and popularity has grown into a more profitable investment than the low returns on bank savings accounts and Treasury securities.

Other publically traded gaming companies with annual dividends are Ameristar Casinos at 50 cents per share, and International Game Technology at 24 cents per share.

"I think, depending on what conditions are going forward, our focus is obviously on increasing that over time," Kenneth Kay, CFO and executive vice president of Las Vegas Sands, told analysts and investors in a Nov. 1 conference call.

Wynn said he is "anxiously awaiting the activities" of the lame duck tax discussions in Congress.

"So when the government put in the 15 percent tax rate for dividends, it caused a lot of companies to distribute money and a lot of dividend taxes to be paid," Wynn said. "I'm not sure the same thing will happen of the tax policy changes dramatically."