Las Vegas Has Been on a Roll. Here’s How to Play the Next Leg of Its Rally.
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Investors are bidding up Las Vegas-related stock prices and valuations. Some casino operators are looking to cut their direct exposure to the city. Las Las. Vegas Sands agreed in March to sell its Strip properties to VICI Properties. Investors can consider three ways to play that market: REITs, casino and resort operators on the Strip and those whose focus is off the strip.
MGM Growth Properties and VICI are direct plays on Las Vegas properties. VicI's shares have returned about 26% this year, ahead of the S&P 500 index's 13%. MGP's recent yield was about 5.5%, versus its five-year average of 4.9%. The company paid out a quarterly dividend of 49. 5 cents a share in April. It is probably the safest way to play MGM Resorts International.
MGM Resorts International has the most hotel rooms on the Las Vegas Strip. Caesars Entertainment has less exposure to the Strip, but it has a portfolio of regional casinos. The company recently closed on its acquisition of William Hill to strengthen its digital-gaming and sports-betting franchise. The CEO of MGM Resort International believes his company is focused on understanding the business and diversifying its revenue. He has been in Las Nevada since the 1970s. It is possible that the company will generate more earnings in the future than it did in pre-Covid levels.
Boyd Gaming and Red Rock Resorts have gained nearly 50% and about 80% this year alone. The regional casinos had several big advantages over their Las Vegas Strip counterparts during the pandemic. Unlike the Strip operators, they rely more on drive-to visitors, including construction workers. They did better than the strip operators when their properties reopened last June. David Baron of Baron Asset Management holds Boyd and RRR on the strength of the Las Las Vegas economy.
