Although winter’s over, don’t overlook this ski resort stock that will be paying investors 50% more this week.
With the market up 140% since the start of 2009, many investors haven’t been concerned with income.
But with the S&P 500 trading at all-time highs, now might be a good time to start looking at some income opportunities.
There’s one dividend stock that’s offering to pay investors 50% more this week.
Vail Resorts (NYSE: MTN) is that name. Vail Resorts is the leading player in the ski resort industry, owning 10 resorts across Utah, Colorado, California and Nevada.
It’s upping its quarterly dividend by 50% to $0.6225 a share this week. That puts its annual payout to $2.49 a share, with a pro forma yield of 2.5%. This is a big positive at a time when the S&P 500 average dividend yield is just under 1.9%.
In fact, Vail Resorts is quietly becoming a solid dividend payer, having upped its dividend for four straight years now. Shares will trade ex-dividend on March 27.
Toward the end of last year, the resort operator bought Park City Mountain Resorts, which gives it an even greater presence in Utah and cross-selling opportunities. It will be connecting its newly purchased Park City resort with the Canyons resort it already owns – creating the largest ski resort in the United States by skiable acreage.
But it also generates revenues from lodging and other ancillary services. Its various luxury hotels are operated under its RockResorts brand. And it has what it calls the EPIC pass, which allows guests to visit multiple locations, including certain resorts in Europe.
Earlier this month, Vail Resorts managed to post better than expected earnings results for the winter quarter, despite a warmer than expected season. Its earnings per share came in 35% higher than expected, and revenues were up 17% year-over-year. And all of its revenue streams improved, including ski resorts, hotels and its real estate development activities.
Things could continue to improve going forward, too.
There’s the idea that cheap gas and higher employment will lead to more discretionary money in consumers’ pockets. More spendable money should lead to increased travel to ski resorts.
So, you have the upside potential from more traveling, but Vail Resorts is also a strong dollar play, where it generates nearly all of its revenues from within the U.S.
Finally, another reason to like Vail Resorts is its strong economic moat. Its moat lies in the amount of land it has and the permits required for building and operating a ski resort. Also, there is finite land available to build an expansive ski resort.
And there are very few options for investors looking to play this wide moat industry. For example, there’s Peak Resorts (NASDAQ: SKIS) and Intrawest Holdings Resorts (NYSE: SNOW), which have market caps of just $100 million and $400 million, respectively. Compare that to Vail Resorts’ market cap of $3.6 billion.
Granted, Vail Resorts’ shares are up over 40% over the last year, now trading close to $100 a share. But it’s hard not to like the stock here. Vail Resorts is the only one of the three major ski resort operators generating positive earnings over the last 12 months.
Its debt load is also much more manageable than the other players. Vail Resorts has a debt-to-capital ratio of just 43%, while Intrawest Holdings and Peak Resorts are at 60% and 100%, respectively.
Vail Resorts has proven that it can weather a tough winter. It has quietly grown into an impressive dividend stock and is positioned nicely with its substantial geographical reach. Plus, it’s a wide moat business like Warren Buffett loves.
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