I will post a REIT of the week here every week usually updated every Sunday. I like REITs and so I gave them their own section apart from stock of the day. 

If you do not know what REITs are, there is a full breakdown in the more info tab, and you will learn everything you need before looking at the company posted here. Also feel free to look any of this up and fact check it with other sources, my main source is seeking alpha or Schwab's website. Finally do your own research before putting any money into a stock do not invest purely off of this page. 

COMPANY - Vici Properties Inc REIT

Ticker – VICI

What is it

VICI Properties Inc. is an S&P 500 real estate investment trust specializing in gaming, hospitality, and entertainment properties. They own iconic Las Vegas sites such as Caesars Palace, MGM Grand, and the Venetian Resort. Their portfolio includes 93 properties across the U.S. and Canada, with 54 gaming venues and 39 other entertainment sites, totaling about 127 million square feet. This includes around 60,300 hotel rooms and over 500 restaurants and bars. Their properties are leased to top gaming and hospitality operators on long-term contracts. VICI also partners with leading operators in other entertainment sectors and owns four golf courses and 33 acres of land near the Las Vegas Strip. Their goal is to build the highest quality experiential real estate portfolio through strategic partnerships.

How do they make money?

  • Rental Income: VICI Properties leases its gaming, hospitality, and entertainment properties to industry-leading operators under long-term, triple-net lease agreements. These leases require tenants to pay rent and cover property expenses such as maintenance, insurance, and taxes.
  • Partnerships and Financing: VICI partners with leading operators in various experiential sectors, providing financing and other real estate solutions. These partnerships often generate additional income through interest and other financial agreements.
  • Property Appreciation: Over time, the value of VICI's real estate assets can increase. When properties are sold at a higher price than their purchase cost, VICI earns a profit.
  • Development Projects: VICI invests in developing new properties or enhancing existing ones. Successful development projects can attract higher-paying tenants and increase property values, leading to higher rental income and capital gains.
  • Golf Courses and Land Holdings: VICI owns championship golf courses and undeveloped land, which can generate revenue through operations or future development projects.

Opportunity

Investing in VICI Properties could be promising due to their stable rental income from long-term, triple-net leases with top operators, and their diversified portfolio across prime locations like the Las Vegas Strip. Their strong partnerships, ongoing property developments, and strategic acquisitions contribute to potential appreciation and growth. The expanding experiential real estate market post-pandemic also offers higher occupancy rates and rental income.

Management

CEO Edward Pitoniak, with experience from Realterm and InnVest REIT, has been at the helm since 2018.

President and COO John Payne brings over 30 years in gaming and hospitality, previously holding senior roles at Caesars Entertainment.

CFO David Kieske has a strong background in real estate finance from his time at Greenhill & Co., Goldman Sachs, and Lehman Brothers.

CIO Samantha Sacks Gallagher and EVP & General Counsel Samantha Sacks Gallagher both bring extensive legal and corporate governance experience from First Potomac Realty Trust.

Dividends

As you know probably the main reason people invest in REIT's is because of the dividend payouts. REITs, by law, have to pay out at least 90% of their annual taxable income as dividends. 

Paid out 1.03 cents Year to date their dividend was not decreased to $1.03

The dividend started out at $1.00 in 2018 and has grown to $1.66 in 2024 with a 5-year average growth of +10.0%. That is above average dividend growth and way above the FEDs inflation target. Although…. With their earnings being released for last quarter their coverage for those dividends is a little shaky and while a decrease is not likely, keep on eye on their adjusted FFO payout ratio. With a dividend coverage ratio at around 153.66% (between the 1-2 target) meaning this company generates enough net income to cover all of their dividends paid to investors. With their latest income statements keep an eye on these two numbers going forward to make sure both of these ratios stay strong.

Performance

As you can see the company is down about 11% in the last 3 years. However, it is up about 26% in the last 5 years. The last few years have been very rough for REITs, so this can be a good sign that a good company is potentially underpriced. 

Metrics

VICI Properties Inc. (VICI) reported quarterly funds from operations (FFO) of $0.55 per share, matching expectations. This is up from $0.51 per share a year ago, adjusted for one-time items. The company beat FFO estimates three out of the last four quarters. Revenue for the quarter ended December 2023 was $931.87 million, surpassing expectations by 0.63%, compared to $769.91 million a year ago. VICI shares have declined 7% this year, while the S&P 500 gained 4.4%.

When looking at FFO you also need to look at Adjusted FFO payout ratio, which measures the FFO paid out as dividends. A rising ratio means dividends are growing faster than cash flow OR cash flow is declining. Below 90% is a good preference. VICI had an AFFO payout ratio of 77% in 2023 and a median 78.9% for the past 5 years meaning cash is growing faster than dividends. This shows that the company has improved its dividend sustainability over the last decade, providing a larger buffer to cover dividend payments and potentially allowing for future increases.

Other metrics to look at

As you can see, they have very strong growth metrics and Seeking Alpha gave them an A+ rating for their growth category. This is also during some of the worst years for REITs since 2008, so if this growth can continue, (it is expected to continue but gradually slow) then this could be a great time to get in on a fast-growing company that is underpriced.

Wall Street Price Forecast

Current price 7/8/2024 - $27.79

Morningstar fair value - $35.48 (27.7% upside)

Refinitiv - $35.03 (27.2% upside)

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