Golden Entertainment Mulling Shareholder Rewards, Analyst Lifts Price Target

Posted on: November 4, 2021, 09:23h. 

Last updated on: November 4, 2021, 11:56h.

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

Golden Entertainment (NASDAQ:GDEN) reported third-quarter earnings yesterday, handily topping Wall Street estimates. The company also floated the idea of increasing shareholder rewards, possibly including a dividend.

Golden Entertainment
Strat owner Golden Entertainment crushed Q3 earnings. A special dividend could be on the table. (Image: Splash Magazines)

The Strat owner reported earnings per share of 91 cents on sales of $282.42 million. Analysts expected earnings of 75 cents on revenue of $259.18 million.

Given our significant available liquidity and current valuation, we view using our existing $50 million share buyback authorization as an attractive means to begin returning capital to shareholders,” said Golden Chairman and CEO Blake Sartini in a statement.

He added, “In addition to using our buyback availability, we will also continue to evaluate potential dividends and other opportunities to create shareholder value in the future.”

Las Vegas-based Golden operates 10 casinos, nine of which are in Southern Nevada, including the Strat. The gaming company is currently in the midst of a $50 million share buyback program and it does not pay dividends.

Gaming Industry Still Light on Shareholder Rewards

Prior to the onset of the coronavirus pandemic in 2020, the gaming industry was a credible dividend destination. But that changed when operators slashed or suspended payouts to conserve cash amid a multi-month shutdown of domestic casinos.

Today, MGM Resorts International (NYSE:MGM) is the only dividend-payer among the major casino operators, and the company pays a paltry one cent a share per year. However, gaming firms are on better financial footing this year than they were before the pandemic, and some, including Golden and MGM, are buying back their shares. That’s prompting talk among analysts that resumed and new dividends are coming in the space.

For its part, Golden paid down $50 million of debt in the September quarter, and there are no outstanding obligations under its $240 million revolving credit facility. At the end of the third quarter, Golden had $1 billion in debt and $219.3 million in cash and cash equivalents, according to the company.

Analysts Bullish on Golden Entertainment

Across a variety of industries, some companies are opting for special dividends — one-time rewards for investors that prevent firms from having to meet ongoing payout obligations. One analyst says it’s possible Golden goes that route.

In a note to clients today, B. Riley analyst David Bain reiterated a “buy” rating on the gaming stock, while lifting his price target to $75, implying upside of about 40 percent from the Nov. 3 close.

“Our price target is based on a 16 percent discount to peer trading averages, likely punitive, given GDEN’s unique portfolio, which we believe carries acute correlation with current and long-term secular growth drivers relative to peers,” said Bain. “We believe management recognizes the value disconnect and is likely to repurchase shares in the relative near-term, with an eye on a potential special dividend in 1H22.”