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Las Vegas Sands: Unlocking Value Could Be a REIT Idea

Tickers in this article: LVS
NEW YORK ( TheStreet) -- On Dec. 18 Las Vegas Sands (LVS) will be just another domino in a long-line of companies paying a special dividend this year. Sands and other cash rich companies are lining up to take advantage of the current tax rates and likely higher rates on dividend income that could kick in automatically on Jan. 1 (with the expiration of the Bush tax cuts).

Triggered by large casino profits, as well as interests in mall and hotel income, Las Vegas Sands plans to reward shareholders by paying out a $2.75 a share special dividend, in addition to the annual dividend of $1.40 a share. That combined dividend payout amounts to an annual dividend yield in excess of 6%.

Las Vegas Sands is a newcomer to paying dividends as the company squeezed out a token last year and the yield hovers around 2% today -- excluding the special dividend.

Maybe there is more to this? Perhaps there could be a compelling opportunity for investors to benefit for Las Vegas Sands and its repeatable income model?

Las Vegas Sand: A Wide-Moat Gamer

Las Vegas Sands, a Fortune 500 company, is the preeminent operator and developer of integrated casino resorts. LVS resorts are exceptionally high-quality mixed-use properties that feature a combination of gaming, lodging, entertainment, and retail facilities. LVS focuses its gaming business on the higher margin mass market, owns retail catering to the high-end luxury market and creates a lavish hotel experience for guests.

As with many companies, the history of LVS begins with the vision of its founding chairman and CEO Sheldon G. Adelson (his bank account will soar by another $1.2 billion with the payout of the special dividend.)

The secret of LVS and Adelson's success was his focused hotel efforts and specifically on courting the convention and tradeshow industry. At the time, when other hotels were focusing on gambling, his approach was unorthodox, even mocked.

Adelson was also among the first to foresee the financial potential of Asia. Before his American competitors, he located his company nearer to the Asian market. Las Vegas Sands opened the Sands Macao in 2004. Macao, the former Portuguese colony turned over to China in late 1999, is the only place on mainland China where casino gambling is legal.

LVS gets the majority of profits and cash flow from its properties in Asia, especially Macau, the only place where millions of Chinese gamblers legally place bets on games of chance. No new casinos will open in Macao for at least two or three years -- a wide moat gamer!

Unlocking the Value of LVS

Las Vegas Sands is trading at $43.65 per share -- around a 50% discount to net asset value. Should the legendary gaming brand convert to a REIT?