I'm not a big gambler myself. I might visit a casino for the entertainment or just to watch other people play at the tables. Most people will probably go home with less money, but it is an entertainment business.
Modern casinos are integrated resorts, developed with hotels, retail stores and other entertainment venues to become a destination in themselves. The operators have more income streams and a greater number of guests enjoying them.
Rather than testing your luck at roulette or speculating in little stocks, you may get more predictable and pleasing returns from these two casino stocks.
SKYCITY Entertainment Group Limited (ASX: SKC), the operators of casinos in cities such as Darwin, Adelaide and Auckland, should be seeing more business as upgrades to gaming areas and hotel spaces in several of its casinos are completed. It is also expecting overseas visitors, especially from China, to arrive in bigger numbers in the second half of FY2014.
Group revenue is increasing over the past few years as the fears of the GFC are fading and people feel they have more money for entertainment and travel. Underlying net profit has steadily increased since 2008.
Its dividend yield is 5%, which may give long-term investors more of a thrill than playing at the blackjack tables. It has a 16.5 PE ratio, which is lower than its industry's average.
James Packer's integrated resorts company, Crown Resorts Ltd (ASX: CWN), has risen from about $11 a share in January 2013 to $16.61 currently, gaining over 50%. In the first half of FY2014, its earnings per share rose about 111% to 52.51 cents.
This year the Melco Crown joint venture company, which Crown Resorts owns a 33.7% stake in, will be opening a new "City of Dreams" casino resort in Manila.
While Crown looks forward to earnings from this new venue, it may also be collecting a dividend from Melco Crown. A special dividend, as well as regular dividend payout policy of 30% of net income, is up for its shareholder approval. Some of that extra income could flow through to Crown's net profits.
Foolish takeaway
Just like for any business, look for strong finances in a company. It can cost a lot to create and maintain popular tourist destinations. Make sure long-term debt isn't piling up too quickly and earnings are stable.
