Sands China’s dividend hike hinges on $2.7B EBITDA target: Goldman Sachs

Macau gaming operator Sands China’s dividend increase timing depends on the company hitting a $2.7 billion EBITDA target, according to analysis by Goldman Sachs.

On August 15th, Sands China announced an interim dividend per share (DPS) of HK$0.25 ($0.032), unchanged from its fiscal year 2024 final DPS, despite a higher payout ratio of 63 percent on reported earnings per share of HK$0.40 ($0.051), up from 50 percent previously. This decision reflects ongoing competitive pressures and a strategic focus on boosting gaming volumes to achieve an EBITDA range of $2.6 billion to $2.7 billion, which analysts project may not be reached until next year.

Goldman Sachs noted that the unchanged dividend may disappoint some investors, particularly in light of Galaxy Entertainment Group’s recent dividend increase. However, the firm views Sands China’s approach as consistent with its strategy of maintaining a stable absolute DPS, as evidenced during the 2014-15 anti-grafting campaigns when it sustained a total DPS of HK$1.99 ($0.255). 

The company faces challenges, including a ‘choppy GGR market share trend’ and increased promotional spending to counter competition, as highlighted during its July 24th results call. Management emphasized driving gaming volume to lift EBITDA from the current annualized run-rate of $2.2 billion to $2.3 billion in the second quarter of 2025 toward the target range.

Looking ahead, Goldman Sachs anticipates potential DPS increases as capital expenditure pressures ease. 

Sands China has already invested significantly in projects like the Londoner under its $4.5 billion 10-year commitment, and overseas investments, such as potential Thailand integrated resorts, are expected to be managed by its parent company. However, risks include additional capital expenditure for upgrading older properties, such as Venetian Macao, Parisian, or Sands Macao. 

Analysts project the final DPS will remain at HK$0.25 ($0.032), totaling HK$0.50 ($0.064) for the full year, before rising to HK$0.80 ($0.102) in fiscal year 2026 and HK$1.00 ($0.128) in fiscal year 2027, implying payout ratios of 57 percent and 62 percent, respectively. Distributing 100 percent of free cash flow could enable up to HK$1.70 ($0.218) per share by fiscal year 2027.

In a separate note, Morgan Stanley noted that Sands China’s first-half 2025 payout implies a 60 percent ratio, matching Galaxy’s and the highest in Macau, but below expectations of HK$0.30 ($0.038). The annualized DPS of HK$0.50 ($0.064) yields 2.5 percent, compared to Galaxy’s 3.5 percent, MGM China’s 3.9 percent, and Wynn Macau’s 6.0 percent. 

Melco Resorts and SJM Holdings pay no dividends due to high leverage. Analysts expect industry-wide dividend growth alongside earnings, making the sector attractive for long-term investors.