VICI Properties Inc. VICI has seen its stock decline 6.4% over the past month, closing at $28.97 on Tuesday. This performance is slightly better than the Zacks REIT and Equity Trust - Other industry’s drop of 6.7%. The growing concerns about inflation, either rising, remaining stagnant or not decreasing, are taking center stage. This is causing apprehension about a potential delay in the next rate cut, unsettling the market and putting pressure on rate-sensitive REITs.
However, this experiential REIT, with a portfolio featuring iconic assets such as Caesars Palace Las Vegas, MGM Grand and the Venetian Resort Las Vegas, along with other market-leading gaming and experiential properties across North America, is well-positioned for a rebound this year. Its substantial scale and strong access to capital enhance its resilience and growth potential.
The full-year 2024 Zacks Consensus Estimate for adjusted funds from operations (AFFO) per share of $2.26 implies a 5.1% increase year over year. Moreover, the recent sell-off has led VICI Properties to offer higher dividend yields, presenting an opportunity for investors. Its dividend now yields 6%. Currently, VICI has a Zacks Rank #2 (Buy).
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Factors That Make VICI Properties Stock a Solid Pick
Robust Portfolio of Iconic Assets: VICI Properties boasts a portfolio of 54 gaming and 39 experiential properties across North America, including renowned landmarks such as Caesars Palace and MGM Grand on the Las Vegas Strip. Its portfolio benefits from high-demand, experience-driven destinations with long-term leases averaging 41 years. With a 100% occupancy rate, these properties are essential to tenants who face significant costs and regulatory hurdles to relocate. These advantages position VICI as a dominant player in a lucrative market, offering consistent and reliable income streams.
Inflation-Protected Cash Flow: VICI’s lease agreements include contractual rent escalations, with 40% of its rent roll tied to CPI as of 2024, projected to increase to 90% by 2035. This alignment with inflation ensures steady cash flow growth, providing stability even during economic uncertainty. Additionally, 74% of the company’s rent roll comes from S&P 500 tenants, reflecting a highly creditworthy tenant base. These factors combine to deliver secure and predictable revenues, solidifying VICI’s appeal to long-term investors.
Demonstrated Growth and Strategic Diversification: Since its inception in 2017, VICI has achieved a 350% increase in adjusted EBITDA while expanding its portfolio beyond gaming to include diversified experiential assets such as Chelsea Piers and Bowlero. This strategic diversification mitigates exposure to gaming-specific risks and establishes VICI as a key player in the broader experiential real estate sector. The company's track record of successful growth initiatives highlights the strength of its management team and underscores its potential for long-term success.
Attractive Dividend Yield and Growth: VICI offers a competitive dividend yield of approximately 6%, backed by disciplined capital management and consistent growth in adjusted funds from operations (AFFO). Since 2018, the company has achieved an impressive 7% annual dividend growth rate, surpassing many peers in the triple-net REIT sector. By committing to distribute 75% of AFFO to shareholders, VICI provides a reliable income stream, making it an excellent choice for dividend-focused investors seeking both steady returns and potential for capital growth.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are OUTFRONT Media OUT and Cousins Properties CUZ, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for OUTFRONT Media’s 2024 FFO per share has been raised by 1.8% over the past three months to $1.73.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has been raised marginally over the past two months to $2.68.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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