3 High-Yield Dividend Stocks With Bright Futures (RDS.B LVS ING)

LVS, RDS.B and ING provide relatively safe yields and long-term growth potential

cash dividends

Source: 401(K) 2012 via Flickr (Modified)

The Brexit vote pushed U.S. Treasury rates to record lows and the S&P 500 Index to new record highs, creating a sort of dash for stocks with a modicum of safety.

money-dividends-185In this time of low interest rates and rising stocks, Las Vegas Sands Corp (NYSE:LVS), Royal Dutch Shell plc (ADR) (NYSE:RDS.B) and ING Groep NV (ADR) (NYSE:ING) offer just the sort of market exposure and stable dividend yields investors crave right now.

Las Vegas Sands Corp (LVS)

Forget Las Vegas. The story for the biggest names in gambling in the past two years has been the precipitous fall of gross gaming revenue in the world’s largest gaming hub: Macau, China.

Macau is currently in the middle of an incredible 25-month streak of negative year-over-year GGR growth. The 2014 crackdown on corruption and money laundering in Macau triggered the fall. June marked the lowest monthly GGR total for Macau since September 2010.

Fortunately for LVS shareholders, UBS reported earlier this month that it expects GGR growth to return to Macau in the fourth quarter of this year, meaning the worst of the downturn is now over. Impressively, LVS has stayed profitable throughout the downfall and still trades at a reasonable forward price-earnings ratio of 20.1.

During LVS’s Q1 earnings call, CEO Sheldon Adelson declared that the company “will continue to return excess cash to shareholders while maintaining our ability to invest in new development opportunities.”

LVS’s payout ratio is currently an elevated 119.7%, which is certainly troubling. However, the 5.6% dividend seems to be a top priority to management. If the company hasn’t cut it by now, it’s unlikely to cut it at this point with the beginning of the next long-term upswing in Macau potentially one quarter away.

Royal Dutch Shell (RDS.B)

RDS.B is another stock that has had its balance sheet stretched extremely thin in recent quarters due to the sluggish global oil market. RDS.B also compounded its short-term liquidity issues when it opted to acquire BG Group for $70 billion last year.

According to an April report from Morgan Stanley, Shell and BG combined to generate -$4 billion in FCF in 2015, and RDS.B is on the hook for $15 billion in dividend payments in 2016. Certainly it’s never ideal to be forced to borrow money to pay the dividend, but investors should hold off on assuming the worst until the dust settles from the BG Group deal.

Shell management has a plan to sell $30 billion in assets by 2018 and expects $4.5 billion per year in cost synergies from the BG deal. In addition, Shell forecasts $3 billion in total cost savings in 2017. The company is cutting capex aggressively without sacrificing production, and could reduce annual capex by $10 billion from 2014 to 2017.

Shell hasn’t cut its dividend payment a single time in the past 70 years. The worst of the oil downturn is seemingly passed, and the table set for long-term FCF growth in coming years. It’s unlikely that the company would opt to cut its 7.1% dividend at this point unless it hits more bumps in the road.

ING Groep (ING)

ING  was hit hard by the surprise Brexit vote, and the stock fell more than 20% during the knee-jerk Brexit selloff. Surprisingly, only about 3% of ING’s loan book is directly exposed to the U.K. If not for fears about the Brexit’s long-term impact on the European economy, ING’s financials would look extremely appealing to investors.

The company delivered strong 5.3% annualized loan growth in Q1, and ING has strong capital ratios compared to its peers.

At a forward P/E of only 9.2, the stock also seems incredibly cheap. And then, of course, there’s the 6.2% dividend. At a reasonable payout ratio of 52.9%, ING seems to have by far the safest dividend of the three stocks mentioned.

In other words, barring a total collapse of the European economy, ING should have no problem continuing to grow and pay its huge dividend.

As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/lvs-rds-b-ing-three-5-dividend-stocks-with-bright-futures/.

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