The Federal Reserve rate hike is a step in the right direction for investors looking for fixed income, but the 0.25% rate is a sobering reminder of just how low the yield remains for many fixed income investments. Stock dividends, on the other hand, are a steady source of income in times of low interest rates.
However, while dividends are intended to be reliable, the reality is that they are only as reliable as the company paying them. Today I’m going to take a look at the dividend of the largest public casino operator in the world, Las Vegas Sands Corp. (NYSE: LVS), to determine if the company’s mouth watering 6.2% dividend is safe or if shareholders should be on the lookout for a dividend cut in the near future.
Rising yield due to falling share price
The current dividend yield of the S&P 500 is 2.1%, so the 6.2% dividend is nearly three times the average yield. While I’m sure management would love all of its shareholders to believe that the company is just exceptionally generous with its payouts, the reality is that LVS likely never intended to pay a yield this high.
LVS has paid a $0.65/share dividend every quarter starting in Q1 2015. When Q1 began, however, the share price was around $58, meaning the $2.60 annual dividend was only a 4.4% yield, which is still relatively high. At the beginning of 2014, when LVS was trading at nearly $80/share, that dividend would have represented only a 3.2% yield.
A bad omen?
Why should LVS shareholders care…
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