Tabcorp Shares Fairly Valued but Offer Investors a Healthy Dividend Yield
Despite trading roughly in line with our AUD 4.50 per share fair value estimate, wagering and lottery giant Tabcorp offers investors a very attractive dividend stream. At the current price, the stock yields a reliable 5% (fully franked), which is impressive, especially given the current low interest rate environment. We think the company can sustain a payout ratio of about 100%, supported by: (1) a highly cash-generating lotteries business, (2) the integration of the acquired wagering businesses...Tabcorp Holdings is an Australian gambling entertainment company. Co. has three segments: Wagering and Media operations, which includes its network of TAB agencies, hotels and clubs, and on-course totalisators in Victoria, New South Wales and the Australian Capital Territory (ACT) as well as its Three Sky Racing television channels broadcasting thoroughbred, harness and greyhound racing and other sports; Gaming Services business, which consist of Tabcorp Gaming Solutions that provides a mix of gaming capabilities, services, advice and financing to licensed gaming venues; and Keno business, a random number game that is distributed to clubs, hotels and TABs and is available online in the ACT.
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