Motley Fool: Peek into Macau’s future shows massive growth

China’s largely autonomous region of Macau is still a long way from being the diverse leisure destination Las Vegas has become. MGM Resorts, for example, generates more than half of its sales from nongaming activities in Las Vegas, but in Macau, gaming still accounts for more than 95 percent of sales. Executives at casino companies are hoping to change that over time. New Macau casinos have not only gaming attractions but also Vegas-style shows.

Macau will never be Las Vegas, simply because of the much larger scale gaming has grown to in Macau, but a diversification away from relying on VIP gamblers would be a smart move.

Connecting to China’s high-speed rail network would make traveling to Macau easier, and there’s even talk of a bridge to Hong Kong. That 40-mile bridge would be one heck of an undertaking, but with the kind of money rolling into Macau casinos over the next five years, the area could easily pay for it.

If we assume a 25 percent growth rate from 2010 to 2015, revenue in the Macau gaming market could be a whopping $72 billion per year. No wonder operators are eager to get shovels in the ground.

When you combine gaming growth with improving infrastructure and a growing middle class in China, the next five years look like prime time for Macau’s casinos.

Ask the Fool

Q: What’s a dividend? – M.J., Santa Rosa, Calif.

A: It’s a payment that many companies make to shareholders out of their earnings. If Dodgeball Supply Co. (ticker: WHAPP) earns $2 per share in profit, it might decide to issue $1 annually to shareholders, using the balance in other ways, such as building its business or paying down debt.

It will probably pay out 25 cents per share every three months. This may seem like peanuts, but it adds up. If you own 400 shares of a company that’s paying $1.50 per share in annual dividends, you’ll get $600 per year from the company. Plus, healthy companies generally increase their dividend amounts periodically. (It’s not unusual for smaller, faster-growing companies, or ones without relatively predictable earnings, to not pay a dividend.)

You’ll often see a dividend expressed as a yield. A company’s dividend yield is its annual dividend divided by its current stock price. So a company paying $2 per year and trading for $50 per share would have a yield of 4 percent (2 divided by 50 is 0.04).

Q: What’s a money market fund? – R.Z., Richmond, Va.

A: It’s a mutual fund that invests your money in short-term, high-quality investments such as Treasury bills, short-term commercial debt and certificates of deposit. Thus, it’s a relatively safe investment.

Money market yields vary according to short-term interest rates and typically exceed rates offered by standard bank accounts. But they fall dramatically short of the stock market’s historical average annual return of 10 percent. They’re great for short-term savings, but ill-suited for long-term investments, as your money won’t grow very quickly. Learn more about short-term savings and find good rates at www.fool.com/savings and www.bankrate.com.

My smartest investment

My smartest investment was buying Yahoo! shares in the mid-1990s when they had fallen to what seemed like a reasonable level to me. Twice I sold off shares when they seemed to be too lofty. Its volatility didn’t bother me at all, and my success with it more than made up for all my earlier mistakes. – J.N., Vero Beach, Fla.

The Fool responds: You did many things right, beginning with paying attention to whether the stock seemed undervalued or overvalued. Too many people simply jump into great companies when they’re overvalued. If you’re not too certain of continued growth, it can be a good idea to sell all, or at least some, of your shares. If you still have long-term confidence in the company, though, consider hanging on. When a stock has surged in value, some investors like to sell enough of their shares to get back their initial investment – the remaining shares’ growth is then gravy.

Experienced investors know that they will occasionally lose money on some stocks, but ideally, their winners will outweigh their losers by a wide margin.