Las Vegas Sands will save as much as $12 million a day after halting its quarterly dividend program, slicing its daily cash “burn rate” in half according to one gaming analyst.
The company said in a statement late Thursday night it was suspending its dividend distribution – $3.16 per share annually – as the casino operator deals with the business impact from the COVID-19 coronavirus pandemic. Las Vegas Sands will continue forward with its $5.5 billion in development projects in Macau and Singapore.
In a statement, CEO Sheldon Adelson said the company has “the balance sheet strength” to “enable us to emerge from this pandemic with all our promising future growth opportunities fully intact.”
Las Vegas Sands’ two Las Vegas Strip properties have been closed since March 17 as part of the nationwide casino industry shutdown. The company voluntarily announced plans to close resorts a few hours ahead of Nevada Governor Steve Sisolak’s ordered closure of all casinos in the state, which ends on April 30. Sisolak is expected to announce next week if the closures will continue into May.
Meanwhile, Las Vegas Sands is continuing to pay its full-time employees in Las Vegas through May 15.
Analysts overwhelmingly praised the dividend suspension.
Bank of America gaming analyst Shaun Kelly said suspending the dividends saved the company between $700 million and $1 billion per quarter and reduced Las Vegas Sands’ cash burn rate by roughly 50%, from $23 million a day to $12 million a day.
“Las Vegas Sands was in a very strong liquidity position prior to this move with $8 billion of cash and available revolver, plus another $2.4 billion delayed draw facility ring-fenced for (the) Singapore construction,” Kelly told investors Friday morning.
Jefferies gaming analyst David Katz said, “Capital preservation and positioning to resume capital growth projects post the crisis is the appropriate strategy,”
Las Vegas Sands’ resorts in Macau, including the Venetian, Parisian, and Sands Macau, are operating but under reduced visitation, as China continues to deal with fallout from the pandemic. In Singapore, the government closed the island nation’s two casinos – Resorts World Sentosa and Marina Bay Sands – from April 7 to May 4 to deal with the pandemic.
Sheldon Adelson
Las Vegas Sands paid shareholders a cash dividend of 79 cents per share in January. Adelson and his family control roughly 57% of the company’s stock.
“As the largest shareholder of this company, my interests are very directly aligned with the interest of all shareholders,” Adelson said in a statement. “I know that the dividend is important to all our shareholders, as it is to me. I am known for the phrase, ‘yay dividends!’, and I assure you that it is still my mantra. But a strong balance sheet is also a vital and necessary component to realizing stockholder value in the decades ahead.”
Casinos in Macau were closed for 15 days in February following the pandemic’s outbreak the forced the suspension of all activities for the lucrative Chinese New Year celebration a month early. Macau gaming revenues fell 11.3% in January, 87.8% in February and nearly 80% in March.
The company will continue the more than $2 billion to rebrand its Sands Cotai Central complex into The Londoner Macau and expand and renovate the St. Regis Tower Suites and the Four Seasons Tower Suites.
Las Vegas Sands is spending $3.3 billion on Marina Bay Sands, which includes a 15,000-seat arena, a 1,000-room hotel, and additional convention space. Expansion to the resort’s casino – one of two in the island nation – is not part of the project.
Combined, the company’s total Macau and Singapore resorts provide approximately 85% of its total quarterly revenue stream.
“We remain extremely optimistic about an eventual recovery of travel and tourism spending across our markets, as well as our future growth prospects,” Adelson said. “We are fortunate that our financial strength will allow us to continue to execute our previously announced capital expenditure programs in both Macao and Singapore.”
Las Vegas Sands will report first quarter earnings on Wednesday, where the company will continue to discuss the coronavirus pandemic.
“The impact of the COVID-19 pandemic on our business has been unprecedented, and I have never seen anything like it in my over 70 years in business,” Adelson said.
He said the company’s greatest priority is “supporting our team members” and assisting the local communities in Macau, Singapore, and Las Vegas.”
Shares of Las Vegas Sands closed at $46.98 Friday on the New York Stock Exchange, up $1.08 or 2.35%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
