Higher royalty fees weigh on MGM China dividend outlook

MGM China Holdings Ltd could face lower dividends per share in 2026 and 2027 after agreeing to double the royalty fee paid to its US-based parent, MGM Resorts International, according to a research note from Jefferies. The change follows a new long-term branding agreement that takes effect on January 1, 2026.

Under the revised terms, MGM China will pay 3.5 percent of its adjusted consolidated net monthly revenues as a licensing fee to use the MGM brand, up from the previous 1.75 percent rate. Jefferies estimates the higher fee will cost MGM China approximately US$164 million in 2026 alone. The brokerage also forecasts declines in adjusted EBITDA and net profit over the next two years, assuming no other major changes to operating conditions.

Jefferies analysts said that if MGM China maintains its current payout ratio of around 50 percent, the higher royalty burden would likely translate into lower absolute dividends per share in 2026 and 2027. However, they added that the situation could prompt management to review its dividend policy under the new cost structure.

The announcement has already had a visible market impact. MGM China’s Hong Kong-listed shares fell sharply following the disclosure, while Morgan Stanley downgraded the stock citing the revised earnings outlook.

Jefferies also noted that MGM China is not alone among Macau operators in paying branding or licensing fees to US-based parents. Sands China and Wynn Macau also incur similar obligations, though MGM China’s revised rate sits at the higher end of the peer range.

The new branding agreement runs for 20 years from January 1, 2026. As Macau operators balance shareholder returns with rising fixed costs, dividend sustainability is expected to remain a key focus for investors in the years ahead.