Tabcorp Holdings Limited to reward shareholders with a bigger dividend in 2015

Tabcorp Holdings Limited (ASX: TAH) says it will increase its dividend payout ratio to 90% of earnings in 2015, thanks mainly to an improved balance sheet.

That’s up from 81% this financial year, and investors certainly liked the move. Shares in Tabcorp were up 3% in late afternoon trade, despite the overall market falling into the red. The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) was down 0.1%.

As expected, Tabcorp announced an 8 cent fully franked dividend, bringing the 2014 financial years’ dividend to 16 cents, the same amount as in 2013. If the company generates similar or higher profits in 2015, shareholders are very likely to see higher juicy fully franked dividends.

The company, which runs wagering, lotteries, Keno and gaming services, today reported a 7.4% increase in adjusted net profit for the 2014 financial year to $149.4 million, on revenues of just over $2 billion.

Tabcorp boss David Attenborough also says he is confident of winning an appeal to the high court, after the Supreme Court of Victoria ruled against the company in its claim for $686.8 million as compensation from the Victorian government. The appeal is listed to be heard in October this year.

In a separate matter, the company is appealing against a Health Benefit Levy which cost the company $19.5 million in the 2014 financial year. The Supreme Court of Victoria had sided with the Victorian government and rules against Tabcorp.

But it’s not the short term that is likely to be an issue for Tabcorp and stable mate Tatts Group (ASX: TTS). Both gaming companies face intense and rising pressure from online gambling, and a whole host of new competitors, with their traditional retail businesses declining. Tabcorp’s Keno revenue is falling, and the company has been hit with new lower racing fees by Racing Victoria. Add in potential loss of revenues from non-renewed licences, sovereign risk and this is one bet I’m not taking on.

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