There are a lot of similarities between Crown Resorts Ltd (ASX: CWN) and SkyCity Entertainment Group Limited-Ord (ASX: SKC) right now.
Both companies were hit by plunging high roller revenue in the last 12 months. Both companies are investing in significant growth programs.
And both companies are paying out dividends yielding about 5%.
So which company should you buy if you're looking for juicy dividends?
Dividend policy show-down
The great news is that both SkyCity and Crown Resorts intend to continue paying dividends while they undertake their respective capital projects.
SkyCity will keep its dividend policy to pay a minimum NZD 20 cents per share, or 80% of normalised Net Profit After Tax (NPAT). This will be tweaked slightly to account for the way interest on construction projects gets capitalised and added to the balance sheet, rather than expensed on the income statement. This is fair and to me better reflects economic reality.
Crown Resorts will adopt a dividend policy aiming to pay 60 cents per share on a full year basis, subject to financial position.
But wait! There's more!
Importantly for Aussie investors the Crown Resorts dividend comes partially franked while the SkyCity dividend comes unfranked.
SkyCity does offer an attractive dividend reinvestment plan. The plan offers a 2% discount to the determined reinvestment price. This may not help if you need the cash right away, but it could be an appealing way to juice your returns if you don't.
Crown, on the other hand, will extend its share buy-back program into the new financial year. The plan could reduce outstanding shares by up to 4% which will leave you with a larger slice of future earnings.
Future earnings potential
Looking forward Crown will abandon the risky Alon project in competitive Las Vegas and focus instead on strengthening its market position in Melbourne with the proposed One Queensbridge project.
This feels like a good strategic move, but combined with the sell off of Melco Crown in Macau the move will increase Crown's reliance on the inbound tourism market and the local economy.
SkyCity has a comparatively conservative growth profile which involves expanding existing sites which I see as likely to having a smaller incremental impact on future earnings.
Where should you put your money?
Despite being a SkyCity shareholder on balance I think that Crown Resorts actually offers a more attractive dividend package with stronger prospects of long-term returns today.
