Boyd Gaming Raises Dividend by 16.7 Percent: More Than Double Expected Payout Growth Rate For 2019 S&P 500

Posted on: June 10, 2019, 03:22h. 

Last updated on: June 10, 2019, 03:24h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Boyd Gaming Corp. (NYSE: BYD), which owns the Gold Coast and the Orleans casinos in Las Vegas, is rewarding long-term investors by boosting its quarterly dividend to seven cents per share, up from six cents.

Boyd Gaming CEO Keith Smith (right) — seen here at the downtown Las Vegas California Hotel with company founder Bill Boyd earlier this year — is rewarding long-term investors with a better-than-average payout. (Image: Tim Pannell/Forbes)

The new dividend will be payable on July 15 to shareholders of record at the close of US markets on June 17, meaning investors that do not already own the stock, but want immediate benefit from the new dividend, need to purchase the shares before that June 17 close of business.

Boyd’s dividend increase is 16.7 percent. That easily outpaces the average payout increase of 13.48 percent by S&P 500 members in 2018.

On average, companies in the benchmark US equity gauge are expected to raise cash rewards to shareholders this year by six percent, indicating Boyd is well ahead of that expected rate.

Attractive Growth Rate

In 2017, Boyd reinstated its quarterly dividend at five cents a share, meaning that in two years, its payout is up 40 percent. Rising cash rewards from companies are important for long-term investors, particularly those that reinvest those dividends back into the company’s stock.

Consider the following example: investors that put $1,000 into the MSCI World Index in 1993 would have had $3,231 by early 2018 had they not reinvested dividends. Those that put payouts back to work by accumulating more shares would have seen that initial $1,000 investment grow to $6,416.

In some cases, dividend growth can also be a sign of a financially sturdy company.

“Our robust and growing free cash flow gives us the ability to continue pursuing a balanced approach to creating shareholder value through investments in accretive growth opportunities, deleveraging, share repurchases and dividends,” said Boyd CEO Keith Smith in a statement.

Data confirms that Boyd’s cash flow is soaring. Last year, the company reported net operating cash flow of $434.53 million, up from $300.34 million in 2016. Its free cash flow tally rose to almost $273 million at the end of 2018, nearly doubling from $139.98 million at the conclusion of 2016.

In 2018, Boyd repurchased $58 million of its own stock and at the end of the year, the company had 111.8 million shares remaining on a previously announced buyback program. Share repurchase programs are another avenue for companies to return capital to investors.

Buyback plans are relevant to dividend growth as well, because as a corporation buys its own stock, those shares are retired. That lowers the firm’s shares outstanding, thereby reducing its dividend expenses.

How Boyd Stacks Up

Based on its new payout and where the stock closed last Friday, Boyd shares yield 1.1 percent. That is well below MGM Resorts (NYSE: MGM) dividend yield of 1.96 percent. Of the major domestic casino operators, Las Vegas Sands (NYSE: LVS) is the highest-yielding stock at 5.49 percent.

Las Vegas Sands, MGM, and Wynn Resorts (NASDAQ: WYNN) each increased dividends earlier this year. Shares of Boyd — which owns gaming properties in 10 US states — are up 20.6 percent year-to-date, putting the stock ahead of its three aforementioned rivals.

Explaining Dividend Yield

Dividend yield is a company’s annual dividend as a percentage of its share price.

For example, a company that has a yearly payout of $1 and currently trades at $10 has a dividend yield of 10 percent.

Some investors believe low yields like Boyd’s are actually a positive trait, because the low yield implies that company is not financially burdened by the cash payout and there is room for dividend growth.