Updated 3/6/25
Churchill Downs Incorporated (CHDN) is famous for the Kentucky Derby, but there’s a lot more to this company than horse racing. Over the years, it has grown into a major player in gaming, entertainment, and online wagering, giving it a diverse revenue stream. While CHDN isn’t a go-to stock for income investors looking for high-yield dividends, its financial stability and commitment to shareholder returns make it worth a closer look.
Let’s break down what dividend investors should know about CHDN and how it fits into a long-term portfolio.
Key Dividend Metrics
📈 Forward Dividend Yield: 0.36%
💰 Annual Dividend Payout: $0.41 per share
📊 Payout Ratio: 7.2% (Very low, indicating strong coverage)
📆 Most Recent Dividend Payment: January 3, 2025
📅 Ex-Dividend Date: December 6, 2024
📈 5-Year Average Dividend Yield: 0.32%
🔄 Dividend Growth Streak: Modest but consistent
Dividend Overview
At first glance, CHDN’s dividend yield might not turn many heads. With a current yield of just 0.36%, it’s not a stock that income investors would typically seek out for strong cash flow. However, the incredibly low payout ratio of 7.2% tells a different story—this company is being conservative with its dividends, ensuring they are well-covered by earnings.
A payout ratio this low means there’s plenty of room for dividend increases in the future. CHDN has also maintained a steady dividend history, even as it continues investing in growth opportunities like new gaming properties and digital wagering platforms. For investors who prefer stability over high yields, this approach makes CHDN a reliable, albeit lower-paying, dividend stock.
Another thing to consider is that CHDN has a history of stock splits, with the most recent one happening in May 2023. Stock splits don’t directly impact the company’s ability to pay dividends, but they can change how the per-share payout appears on paper.
Dividend Growth and Safety
One of the biggest strengths of CHDN’s dividend is how sustainable it is. The low payout ratio leaves plenty of flexibility for increases, even in a challenging market environment. Unlike companies that stretch themselves thin trying to maintain high dividends, CHDN takes a more measured approach.
Looking at the past five years, the average dividend yield has hovered around 0.32%, showing a steady commitment to payouts. While the dividend growth rate isn’t particularly aggressive, it’s also not at risk of being cut, which is a key factor for investors who prioritize consistency.
Even with its ongoing capital expenditures, CHDN has kept its dividend payments intact, a sign of strong financial management. While this isn’t a stock that will deliver massive dividend growth year after year, it’s one that investors can count on to maintain stable payouts.
Chart Analysis
Trend Overview
The stock price of Churchill Downs Incorporated (CHDN) has been in a clear downtrend over the past few months. After reaching highs above 140, it has steadily declined, recently settling around 113.20. The breakdown has been persistent, with lower highs and lower lows forming a well-defined bearish structure.
Moving Averages
A significant technical signal here is the death cross, where the 50-day moving average (orange line) has crossed below the 200-day moving average (blue line). This is often viewed as a bearish indicator, suggesting that momentum has shifted downward for the longer term. The 50-day moving average continues to slope downward sharply, reinforcing the stock’s weakness.
The 200-day moving average has flattened out, signaling that the stock has lost its long-term uptrend. A recovery would require CHDN to regain the 50-day moving average and start forming higher lows, but right now, there is no clear sign of that happening.
Volume Analysis
Volume has been relatively elevated during the decline, indicating strong selling pressure. There are occasional green volume spikes, suggesting buyers have attempted to step in, but these efforts have failed to produce any meaningful upside reversal. The steady increase in red volume bars shows that sellers have remained in control.
One notable volume spike occurred in early October, likely driven by earnings or another major event. However, the price action since then suggests that sellers quickly overwhelmed any bullish momentum, leading to the continued decline.
Relative Strength Index (RSI)
The RSI is sitting near 39, which is approaching oversold territory but not quite there yet. A reading below 30 would suggest the stock is extremely oversold and may be due for a bounce, but right now, it indicates continued weakness without an immediate reversal signal.
Recent Candlestick Patterns
The last five candles have been relatively small-bodied, showing some consolidation after the recent selloff. However, the wicks on these candles suggest that buyers are struggling to push prices higher, as each attempt to rally has been met with selling pressure. This kind of price action often precedes another leg lower unless buyers can establish a strong support level.
Key Support and Resistance Levels
The 113 level is currently being tested, and it appears to be acting as a short-term support zone. If this level fails, the next major area of interest could be around 110, which is a psychological level and near the stock’s 52-week low.
On the upside, the first significant resistance is near 120, where the stock previously attempted to bounce but failed. The 50-day moving average around 124 is another key resistance level that would need to be reclaimed before any real shift in momentum can occur.
Analyst Ratings
📈 Upgrades
Several analysts have maintained or slightly adjusted their positive outlook on Churchill Downs Incorporated. Stifel Nicolaus recently reiterated their optimism, adjusting the price target from 🔼 $164 to $161. While this represents a minor revision, it still signals confidence in the company’s long-term fundamentals.
Another positive update came from Wells Fargo & Company, which maintained an overweight rating but slightly lowered its target from 🔼 $165 to $158. The adjustment reflects a recalibrated valuation rather than a shift in sentiment, indicating that while near-term headwinds exist, the overall business remains strong.
📉 Downgrades
On the more cautious side, Mizuho revised its price target downward from 🔽 $157 to $151, maintaining an outperform rating but signaling concerns over potential short-term risks. This suggests that while the stock remains fundamentally solid, factors like broader market conditions and debt levels could create volatility in the near term.
🏁 Consensus Price Target
The overall sentiment among analysts points to a 12-month price target of around $160.50. This represents a potential upside from current levels, reflecting a balanced outlook that weighs both growth opportunities and external challenges in the gaming and entertainment sector.
While some adjustments have been made in price targets, the general consensus remains positive, with analysts recognizing both the strengths of CHDN’s business model and the short-term pressures influencing the stock’s movement.
Earnings Report Summary
Churchill Downs Incorporated (CDI) just wrapped up another quarter, and the numbers show a company that continues to expand and strengthen its core business. The fourth-quarter results highlight steady growth, boosted by strategic investments in gaming and racing operations.
Fourth Quarter Performance
Revenue came in at $624.2 million, which is an 11% increase from the same time last year. One of the biggest drivers of this growth was the Live and Historical Racing segment, which brought in $275.5 million, up from $235.3 million the year before. A big part of this came from the opening of The Rose Gaming Resort in Northern Virginia and the continued success of other historical racing machine (HRM) venues in the state.
The Gaming segment also had a strong showing, generating $257.5 million in revenue compared to $230.2 million in the previous year. This reflects CDI’s focus on expanding its gaming operations and improving customer engagement across its casino properties.
The Wagering Services segment, which includes online betting, saw a slight decline, with revenue dropping to $108.0 million from $110.6 million. The dip was mainly due to some softness in the sports betting sector, but other areas helped cushion the impact.
On the bottom line, CDI reported a net income of $71.7 million, up 24% from last year’s $57.6 million. Adjusted EBITDA also rose 8% to $236.6 million, showing that the company is not just growing revenue but also improving profitability.
Full-Year Highlights
For the entire year, CDI hit $2.734 billion in revenue, up 11% from $2.462 billion in 2023. A major highlight was the 150th Kentucky Derby, which set new records for both total wagers and profitability.
The company also continued expanding its HRM venues, with The Rose Gaming Resort and Rosie’s Emporia playing a big role in increasing revenue. CDI’s push into new gaming markets has clearly paid off, helping drive long-term growth.
Looking at the numbers, it’s clear that CDI is benefiting from strong demand in its racing and gaming businesses. While sports betting saw a minor slowdown, the company’s investments in new properties and technology are positioning it for future success.
Financial Health and Stability
While CHDN’s dividend looks safe, its balance sheet deserves a closer look. The company carries a significant amount of debt, which is something investors should keep in mind.
- Total Debt: $4.97 billion
- Debt-to-Equity Ratio: 450.78% (Very high)
- Current Ratio: 0.56 (Below 1.0, which signals potential liquidity concerns)
Having a high debt load isn’t necessarily a red flag, especially for a company in the gaming and entertainment industry where large capital expenditures are common. However, a debt-to-equity ratio of 450% means CHDN is heavily leveraged. If interest rates continue rising or the economy slows down, this could put pressure on the company’s financial flexibility.
On the positive side, CHDN generates strong cash flow, with operating cash flow sitting at $772.7 million. This cash flow allows the company to service its debt while still returning capital to shareholders.
One area that raises some concerns is the negative levered free cash flow of -$52.33 million. This means that after covering all expenses, including debt payments, CHDN isn’t left with much excess cash. While not necessarily a long-term problem, it’s something to watch, especially given the company’s capital-intensive business model.
Valuation and Stock Performance
Stock Price Trends
- Current Price: $113.20 (March 6 Close)
- 52-Week High: $150.21
- 52-Week Low: $111.10
- 50-Day Moving Average: $124.20
- 200-Day Moving Average: $134.64
CHDN’s stock has been under some pressure lately, trading near its 52-week low and well below its 50-day and 200-day moving averages. This suggests that the stock is in a downward trend, possibly reflecting broader market concerns or sector-specific challenges.
Valuation Metrics
- Trailing P/E Ratio: 19.93 (Reasonable for its industry)
- Price-to-Sales Ratio: 3.09
- Price-to-Book Ratio: 7.68 (A bit high, but expected for a capital-intensive business)
Compared to its historical valuation levels, CHDN doesn’t appear to be overpriced, but it’s also not trading at a deep discount. Investors who are bullish on the long-term prospects of the gaming and entertainment industry might see this as an opportunity, while those focused on short-term price trends may prefer to wait for signs of stabilization.
Risks and Considerations
Every investment comes with risks, and CHDN is no exception. Here are a few things investors should be mindful of:
- High Debt Load – The company is carrying nearly $5 billion in debt, which means it needs strong cash flow to stay financially flexible. Any slowdown in gaming revenue could make this a bigger issue.
- Low Dividend Yield – For income-focused investors, CHDN’s 0.36% yield isn’t likely to be a major selling point. While safe, the dividend is more of a bonus rather than a primary reason to invest.
- Stock Volatility – CHDN has been trading near its lows, and if momentum remains negative, there could be further downside before the stock stabilizes.
- Economic Sensitivity – The gaming and entertainment industry is tied to consumer discretionary spending. If the economy weakens, CHDN’s revenue could take a hit.
- Interest Rate Risk – Higher interest rates can make debt refinancing more expensive, potentially putting more strain on CHDN’s balance sheet in the future.
Final Thoughts
Churchill Downs isn’t a traditional dividend stock, but that doesn’t mean it should be overlooked. The company has a well-protected dividend with plenty of room for growth, thanks to its low payout ratio and strong cash flow. However, the trade-off is that the yield is quite low, making it less attractive for investors who rely on dividends for income.
The company’s high debt levels are something to keep an eye on, especially in a rising interest rate environment. On the other hand, its long history of strategic growth and cash flow generation gives it a solid foundation.
For investors looking for a stock with long-term growth potential that also offers a small but steady dividend, CHDN could be a compelling option. But for those focused on maximizing dividend income, there are higher-yielding stocks out there that may be a better fit.
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