MGM Grand cancels historic dividend

Tuesday, April 18, 2000 | 11:02 a.m.

In the end, MGM Grand Inc.'s historic dividend lasted just a single quarter.

MGM Grand said today it has discontinued payment of cash dividends. The dividend, announced in December 1999, was the first ever announced by a major gaming company.

But the pending acquisition of Mirage Resorts -- and the resulting $6.4 billion debt load MGM Grand will carry -- convinced company management that the cash needed to be spent on other purposes.

"We endeavor to maintain the most conservative balance sheet possible," said Jim Murren, president and chief financial officer of MGM Grand. "We are acquiring a company for cash, which will incur a significant amount of debt initially.

"It's a comfortable position to be in, because of the significant free cash flow all properties from both companies generate. Our objective is to use that free cash flow to reduce debt and reinvest in the buildings, rather than paying dividends or buying back stock."

A gaming analyst said it was the most logical move for MGM Grand.

"When you're a leveraged company, why have that cash go out the door?" said Stuart Linde, analyst at Lehman Bros.

The dividend was 10 cents per share per quarter.