We recently compiled a list of the 10 Best Casino Stocks that Pay Dividends. In this article, we will have a look at where Red Rock Resorts, Inc. (NASDAQ:RRR) ranks among other casino stocks that pay dividends.
The casino industry is making a comeback after the setbacks caused by the pandemic in 2020. It took a while for the sector to recover, with several factors at play, but the rebound is now clear with the easing of social distancing measures. Data from the Gaming Inspection and Coordination Bureau showed that Macau’s gaming revenue surged by 14.8% in August this year, surpassing expectations. The increase in demand for entertainment during China’s summer vacation has driven growth in the world’s largest casino hub. Casino stocks fall under the larger leisure and hospitality sector and are affected by a range of influences, such as the state of the economy, consumer spending habits, and changes in gambling regulations.
Also read: 10 Best Casino Stocks To Buy According to Analysts
Investor confidence in the casino industry has also skyrocketed, thanks to their ability to consistently hit it out of the park over the years. Casino revenues experienced a notable increase in 2023. Additionally, online casinos, which mainly gained importance during the pandemic, also posted record earnings last year. A report by the American Gaming Association (AGA) revealed that brick-and-mortar casino slots and table games generated a record $49.4 billion in 2023, marking a 3.3% increase over 2022. On the state level, 19 out of 27 traditional gaming markets achieved record annual revenues. Online casino revenue also surged in 2023, growing 22.9% year-over-year to $6.2 billion across the six states with fully legalized iGaming. The report further highlighted that 12 of the top 20 commercial casino gaming markets saw revenue growth, with the Las Vegas Strip leading the way with the most significant year-over-year gains.
The casino industry, like many others, is evolving quickly to keep up with current trends. In a recent move, Singapore has made changes to the Casino Control Act, allowing its two casinos to offer cashless gaming options, though cryptocurrencies will not be permitted, as reported by CNA. Cashless bets can be placed at gaming tables or machines by using virtual credits from cashless gaming accounts or e-wallets. This adjustment is the most recent update to casino regulations in Singapore, which had previously tightened rules by lowering the threshold for monitoring cash deposits at casinos to prevent misuse by terrorist and criminal groups.
The shift to cashless betting has highlighted people’s growing preference for digital platforms. The pandemic underscored the need for contactless options while still allowing people to enjoy these activities. Sports betting is also becoming more prominent since it operates through digital channels, providing a similar thrill to that of casinos. According to the AGA, while commercial gambling revenue is on the rise in most states where it’s legal, the growth in sports betting and online gambling is outstripping that of traditional casinos. So much so that it seems that Americans are withdrawing funds from their stock brokerage accounts to support their online betting habits. This is the main conclusion from a recent working paper titled Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households. The paper suggests that for every dollar spent on sports betting, net investments in stocks and other financial assets decreased by just over $2. With that, we will now take a look at some of the best casino stocks that pay dividends.
A close-up of a roulette wheel spinning at an online casino.
Our Methodology:
For this list, we scanned Insider Monkey’s database of Q2 2024 and selected companies that are involved in the casino and gambling industry. These companies own and operate casinos, resorts, and other gaming and entertainment facilities. From the resultant list, we picked the 10 best casino stocks that pay dividends to shareholders and ranked them in ascending order of the number of hedge funds having stakes in them as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
7. Red Rock Resorts, Inc. (NASDAQ:RRR)
Number of Hedge Fund Holders: 17
Red Rock Resorts, Inc. (NASDAQ:RRR) is a Nevada-based gaming, development, and management company that operates strategically located casinos and entertainment properties. The company has developed around $5 billion worth of regional gaming and entertainment destinations across various jurisdictions. It is also a recognized leader in Native American gaming, having developed several successful properties, including one currently managed in northern California. In Las Vegas, the company’s properties are strategically distributed throughout the market, making them highly accessible, with over 90% of the city’s population residing within five miles of one of its gaming facilities.
Red Rock Resorts, Inc. (NASDAQ:RRR) reported strong earnings in the second quarter of 2024. The company’s revenue for the quarter came in at $$486.4 million, up 17% from the same period last year. Its Las Vegas operations also showed a 17% YoY growth from the prior-year period at $483.2 million. The company’s stable cash position indicates a solid foundation for future expansion projects.
Baron Funds highlighted the growth prospects of Red Rock Resorts, Inc. (NASDAQ:RRR) in its Q2 2024 investor letter. Here is what the firm has to say:
“Shares of Red Rock Resorts, Inc. (NASDAQ:RRR), an owner and operator of casinos in the Las Vegas Locals market, declined 7.7% in the second quarter and hurt performance by 35 bps. This was due to slower-than-expected growth in the Las Vegas Locals market and greater-than-expected cannibalization of its casinos from the opening of its new Durango casino late last year. The Durango casino is generating strong results that should enable Red Rock to meet its projected 20% return on invested capital, pay down debt, and return to its targeted leverage ratio of 3 times by the end of next year. We believe the new casino combined with continued market growth should generate high single-digit growth in EBITDA and double-digit free cash flow growth over the coming years. Red Rock currently has over 300 acres of gaming-entitled land to develop. Its margins remain above pre-pandemic levels, despite increasing wage costs, thanks to strong incremental margins on revenue generated from its new resort.”
Red Rock Resorts, Inc. (NASDAQ:RRR), one of the best casino stocks that pay dividends, has remained committed to its shareholder obligation. In the most recent quarter, the company returned $27.5 million to investors through dividends. It offers a per-share dividend of $0.25 every quarter and has a dividend yield of 1.85%, as of September 12.
Red Rock Resorts, Inc. (NASDAQ:RRR) was a popular buy among elite funds at the end of Q2 2024, as hedge fund positions in the company grew to 17, from 13 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these funds have a total value of over $203.6 million. Among these hedge funds, Diamond Hill Capital was the company’s leading stakeholder in Q2.
Overall, RRR ranks 7th on our list. While we acknowledge the potential for RRR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.