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Experts Mixed on Gaming Dividends1 August 2003LAS VEGAS – As reported by the Las Vegas Business Week: “Casino earnings season quickly became dividend season, as gaming operators made decisions about sharing their profits with their investors or not. While those who have chosen to do so reaped hefty percentage increases in their stock value, others who have held off on declaring a dividend may be feeling the chill. “But is the recent dividend blitz and subsequent gaming stock climb warranted? “Not really, according to Larry Klatzkin, a gaming stock analyst with Jefferies Equity Research Inc., a New York-based investment research firm that currently has a hold position on MGM Mirage, a buy rating on International Game Technology [IGT] and a hold on Mandalay Resort Group. “In a recent report by the group titled, Is the Bloom Off the Rose? Are Dividends an Answer or Symptom?, Klatzkin admits to being baffled by recent stock run-ups for Station Casinos (11 percent in the past week), Harrah's (12 percent in the past week), among others who maintained strong performances during the dividend blitz of the last two months. International Game Technology and Mandalay Resort Group announced dividends in the first half of June and are still holding strong gains of 24 and 13 percent, respectively, since declaring dividends. We remain confused by the extremely strong positive reaction to nearly all gaming stock prices with the expected potential dividend payouts.... While we continue to be positive on the outlook for the gaming sector, we do not agree with investor excitement over the possibility of many companies paying dividends, the report states. “…Other experts don't see the validity in Klatzkin's argument. Marc Falcone, a gaming stock analyst for Deutsche Bank Securities, says investors are still obviously encouraged by the recent legislation and the dividend blitz in gaming and other sectors. “…Robert Maltbie, president of Los Angeles-based Millennium Asset Management, says the recent dividend declarations are a red flag for growth investors. “…Falcone, says that despite Harrah's dividend being at approximately 27 percent of operating cash flow, he still sees plenty of growth momentum in the company. “…But Klatzkin also questioned Harrah's declaring of a 30-cent quarterly dividend after previously announcing that it would spend $1B in England after gaming restrictions are lifted. “…He also points out that some companies, like MGM Mirage and Park Place were correct in opting out of a dividend because they are currently eyeing expansion opportunities. MGM has been rumored to be eyeing another Las Vegas and Atlantic City property, while making alliances for expansion into the UK market…” |