Tabcorp Holdings Limited's (ASX: TAH) attractive 6.5% fully franked dividend might not be enough for investors looking at the company's odds for future growth.
Tabcorp offers a range of gambling and entertainment products across many business units throughout Australia including wagering, gaming, keno and more. Recent developments in the Internet has opened the door for online betting, making it more convenient than ever to lay your money on the line. But Tabcorp isn't the only one cashing in.
The Internet has made it all too easy for foreign companies to squeeze the odds on Australian betting. Based in the Northern Territory, Bet365 is the biggest online betting company to hit Australia's shores in a long time. With over 10 million customers in 200 different countries, Bet365 is the UK's seventh largest private business and poses a threat to established Australian betting companies.
Tomwaterhouse.com.au is another online betting service wanting to cash in on the Australian market. The Waterhouse name is the biggest in Australian bookmaking because it knows what punters want. Quick, easy, and secure betting methods are what avid new punters desire but retention of customers might be the only thing that keeps these companies in the race.
Australian Competitor Tatts Group Limited (ASX: TTS) is a gambling business providing similar products to Tabcorp but its biggest bet is its lotteries business. Delivering consistent dividends and results for shareholders, Tatts Group might be the safest bet after all. Through a diversified business model they have avoided increased pressure from the online market and allowed themselves to keep a foothold in the Australian gambling industry.
Competing against big names and bigger companies, finding gaps in the market might be Tabcorp's best bet. Ainsworth Game Technology's (ASX: AGI) share price exploded in recent years thanks to its firm focus on international expansion and product differentiation. Sitting below $0.50 in December 2011, Ainsworth opened today at $3.57. They took the gamble and it paid off, big time.
Foolish takeaway
Trading above $18 in 2007, shares in Tabcorp have plummeted to $3.16. It seems the company's long-term track record isn't worth the bet, but when a company seems down and out it can be an investor's delight. With a healthy dividend, P/E ratio of 11.87 and a latest yearly shareholder return of 24.7%, the company might just be in the right place at the right time.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz does not own shares in any of the mentioned companies.
