Vici Properties: The 5.4% Yielding Dividend Stock Set to Beat the Market

In the ever-evolving world of real estate investment trusts (REITs), one name stands out as a beacon of stability and growth: vici properties. With a 5.4% dividend yield and a portfolio that includes some of the most iconic gaming properties on the Las Vegas Strip, vici is poised to deliver market-beating returns for patient investors. Let's dive into the details and see why this stock is a must-have for your portfolio.



A Portfolio of Champions

Vici Properties owns 54 gaming properties, including some of the most recognizable names in the industry. From caesars Palace to The Venetian, these properties are not just buildings; they are landmarks that attract millions of visitors each year. But Vici's portfolio isn't just about glamour—it's about stability. The average lease in Vici's portfolio has 41 years left on it, and 90% of its leases are protected long term from inflation, meaning that rent growth is tied to the Consumer Price Index (CPI) growth. This stability is a significant advantage compared to other high-yield dividend stocks that may have shorter lease terms or less predictable income streams.

Diversified Revenue Streams

Vici's portfolio is more than just gaming. It contains over 60,000 hotel rooms, 4.2 million square feet of gaming space, 6.7 million square feet of meeting space, over 1,000 food, beverage, and retail outlets, and more than 50 entertainment venues. This diversification reduces the risk associated with relying on a single revenue source, making Vici more resilient compared to other high-yield dividend stocks that may be more concentrated in a single sector or type of property.

Strong Capital Allocation and Growth Potential

Vici has a proven track record of adding value through acquisitions. It has already acquired its largest rival (MGM Growth Properties), The Venetian, and several other assets, increasing per-share funds from operations (FFO) as a result. This ability to execute strategic acquisitions sets Vici apart from other high-yield dividend stocks that may struggle with capital allocation or lack growth opportunities.

Creative Financing and Growth Pipeline

In a tough environment with higher interest rates, Vici has found ways to continue growing by making several financing investments, essentially acting as the lender. For example, in 2024, Vici loaned money to finance the construction of a new Margaritaville resort and several properties for Great Wolf Lodge. These deals not only provide immediate profits but also give Vici the right to eventually acquire the property being financed, creating a built-in growth pipeline. This strategy is unique compared to other high-yield dividend stocks that may be more reliant on traditional growth methods.

Dividend Yield and Safety

Vici Properties offers a 5.4% dividend yield, which is well-covered by the company's profits. This yield is competitive with other high-yield dividend stocks like W.P. Carey (5.5%) and Dominion Energy (5.0%), but Vici's strong balance sheet and management team's track record of smart capital allocation make it a more reliable choice for long-term investors.

Potential Risks and Challenges

While Vici Properties has a strong portfolio and a proven track record, it is not without risks. The relatively high-interest environment has made it less attractive to raise capital to buy more properties, slowing down acquisition activity. Additionally, the company's financing investments come with the risk of default by the borrowers. For example, Vici loaned money to finance the construction of a new Margaritaville resort and several properties for Great Wolf Lodge, and agreed to finance renovations at The Venetian at a 7.25% yield. While these investments provide a profit from the spread, they also expose Vici to the risk of non-payment.

Another challenge is the potential for economic downturns, which can affect both gaming and non-gaming real estate. The gaming industry is particularly cyclical, and economic downturns can lead to reduced consumer spending on entertainment and travel. This could impact the occupancy rates and revenue of Vici's properties. Furthermore, the success of Vici's non-gaming acquisitions will depend on the company's ability to manage and integrate these new assets effectively. The Bowlero acquisition, for instance, represents a new business model for Vici, and the company will need to demonstrate its capability in this area to ensure long-term success.

Conclusion

Vici Properties' strategy of focusing on gaming real estate and expanding into non-gaming experiential real estate positions it for long-term growth by leveraging its strong portfolio and strategic acquisitions. However, the company faces potential risks and challenges, including the high-interest environment, the risk of default on financing investments, economic downturns, and the need to effectively manage and integrate new assets.

In summary, Vici Properties' combination of a high-quality portfolio, long-term leases, diversified revenue streams, strong capital allocation, and creative financing strategies makes it a standout candidate for producing market-beating returns. For patient investors looking for a reliable dividend stock with growth potential, Vici Properties is a must-have addition to your portfolio.

Ask Aime: What makes Vici Properties a must-have for dividend-seeking investors?