Crown Resorts (ASX:CWN) share price slumps amid dividend suspension

Crown shareholders will not receive a payout in FY21…

The Crown Resorts Ltd (ASX: CWN) share price has dipped into the red from the opening of trade on Tuesday.

Crown shares are now exchanging hands at $9.22 each, a 0.97% drop from the market open.

The casino group's shares are on the move today after the casino group reported its FY21 earnings on Monday.

In it, Crown announced the suspension of its dividend for FY21. As such, shareholders will not realise any payout in FY21 from their Crown shareholdings.

Let's investigate a bit further.

a sad gambler slumps at a casino table with hands on head and a large pile of casino chips in the foreground.

Image source: Getty Images

Why is Crown suspending its dividend for now?

It was a difficult year for the Crown Resorts share price in 2021, marred by money laundering allegations and Covid-19 impacts on the company's operations. Crown's casino licenses were also called into question after a royal commission earlier in 2021.

In its report, Crown recognised a 31% downturn in revenue from the year prior, whereas earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the year came in 77% behind FY20. This contributed to a 429% increase in after-tax loss to $261.6 million.

The company's $892 million net debt service also remains at risk of default, should regulators revoke the group's casino licenses, according to Crown.

In fact, as "part of the arrangement with lenders", the group "agreed not to pay dividends" during the period in which certain "waivers" are in place on its debt.

These "waivers" are in reference to agreements reached with Crown's lenders, regarding "a series of modifications to Crown's existing financing arrangements". For instance, the company was granted an extension of $650 million in debt with "near-term maturities" to October 2023.

Crown would not return to paying a dividend until at least halfway through FY22, the company said. The arrangement also means Crown's largest shareholder, James Packer, will go without a payout for one more year, according to a report in The Australian.

Packer's 37% shareholding has been a contentious issue of late, with US private equity firm Oaktree withdrawing its $3 billion offer to acquire the stake. Crown has also pushed back takeover offers from Blackstone and Star Entertainment for $8 billion and $12 billion, respectively.

Nonetheless, Crown shareholders will be hoping the group reinstates its dividend over the coming periods. For context, Crown declared a 37.5 cents per share dividend in FY20, franked at 25% of the Australian tax rate of 30%.

Crown Resorts share price snapshot

The Crown Resorts share price has had a difficult year to date, posting a loss of 5% since January 1. Despite this, Crown shares are still 1.5% in the green over the past 12 months.

These results have lagged the S&P/ASX 200 index (ASX: XJO)'s return of around 25% over the past year.

The author Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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