With a Dividend Yield of More Than 5%, Is Vail Resorts Stock a Buy?

Core Viewpoint - Vail Resorts offers an attractive dividend yield exceeding 5%, but the stock has underperformed in recent years due to various challenges affecting visitation and overall performance [1][2]. Financial Performance - The latest quarterly results indicate mixed performance, with a reduction in full-year guidance due to weaker-than-expected spring lift-ticket visitation. However, profitability remains solid, with expected EBITDA between $831 million and $851 million and net income between $264 million and $298 million [4]. - The company declared a quarterly dividend of $2.22 per share, reinforcing its commitment to shareholder returns despite a significant debt load, with net interest expenses projected between $167 million and $171 million [5]. Market Trends - Season pass trends show a 1% decline in units sold for the 2025 to 2026 season, while revenue from season passes increased by approximately 2%, indicating a shift towards higher pricing [6]. - Leadership changes, including the return of Rob Katz as CEO, aim to address operational challenges and improve capital allocation following shareholder pressure [7]. Valuation and Dividend Sustainability - The current stock price of around $159 implies a dividend yield of about 5.5%, which is appealing for a premium leisure brand [8]. - The high payout ratio raises concerns, as the projected earnings per share could be in the low $8 range, making the annual dividend of $8.88 exceed expected GAAP earnings. However, free cash flow is significantly higher than net income, suggesting the dividend can be maintained if cash flow remains strong [9][10]. Risks and Considerations - Operational risks include weather variability and visitation trends, which could impact financial results. The recent CEO change may signal a need for faster improvements [11]. - The stock is valued at 20 times earnings, reflecting weak performance and inherent risks. Long-term investors may find the current price justifiable if visitation stabilizes and cash flow remains healthy, but more conservative investors might prefer to wait for clearer signs of growth [12].