It hasn't been a great year for The Lottery Corp Ltd (ASX: TLC) shareholders.
Its shares finished Monday down 0.62% at $4.78, leaving them just above their 52-week low of $4.75.
The stock has now fallen around 18% over the past 12 months and is down more than 7% in 2026.
Yes, that might have some investors wondering whether the recent weakness has created a buying opportunity.
After all, the company owns some of Australia's best-known lottery brands and currently offers a fully franked dividend yield of around 3.5%.
But despite the lower share price, I won't be buying.
Here's why.
Image source: Getty Images
Higher rates are a concern
My biggest concern is what happens to consumer spending over the next 12 months.
The Reserve Bank of Australia (RBA) has already lifted interest rates 3 times this year, taking the cash rate to 4.35%.
And another increase looks likely today, with all 29 economists surveyed by Bloomberg expecting a 25-basis-point hike to 4.60%.
That's not great news for households already dealing with higher mortgage repayments and rising living costs.
And this is where I see a potential problem for the company.
Lottery tickets are ultimately a discretionary purchase.
If households have less money after paying their mortgage and other bills, I think spending on lottery tickets could come under pressure.
With rates potentially staying higher into 2027, that's a risk I'm not willing to ignore.
FY26 wasn't exactly exciting
The company's latest results haven't given me much reason to rush in either.
FY26 revenue fell 2.7% to $3.58 billion, while underlying net profit after tax (NPAT) dropped 6.3% to $342.5 million.
Statutory net profit fell even further, declining 22.1% to $284.6 million.
To be fair, weak jackpot activity played a big part in the softer result.
There were no $100 million Powerball jackpots during the year, compared with 4 in FY25, while Oz Lotto had no $50 million jackpots.
Base games performed better, with turnover increasing 5.6%, while Keno revenue climbed 3% to $364.3 million.
But looking ahead, there are still a few things that concern me.
Lottery Corp expects operating expenses of between $305 million and $315 million in FY27, up from $296 million last year.
It also has a $1.145 billion payment coming up for its new Victorian lottery licence, which could put further pressure on the balance sheet.
None of this is enough to get me excited about buying the shares just yet.
Would I buy?
At $4.78, Lottery Corp shares are certainly more attractive than they were a year ago.
And there are still plenty of things to like about the business.
It owns some of Australia's biggest lottery brands, generates strong cash flow, and maintained its fully franked 16.5-cent annual dividend.
But I don't think the current economic environment is particularly favourable.
With earnings already moving backwards and household spending facing more pressure, I think there are better opportunities elsewhere.
For me, this is one ASX dividend share I'd stay away from for now.
