VICI Properties (NYSE:VICI) is a REIT that specializes in hotel and casino properties. Spun off from Caesar Entertainment in 2017, the company owns several of the most prominent properties in the United States.
Assets owned by VICI include Caesar’s Palace and The Venetian Resort in Las Vegas, Chelsea Piers in New York and the Hard Rock Casino in Cincinnati. In addition to these prestige properties, the company owns several hundred other hotels, clubs, bars and experience-based properties.
As a REIT, VICI offers dividend income far in excess of what investors can find in more traditional stocks. Since being spun off, VICI has managed to raise its already high dividend in each consecutive year. Between its portfolio of well-known properties and its ability to produce current income, is VICI Properties worth buying today?
Key Points
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VICI offers a 5.2% yield, growing dividends annually with a 65% payout ratio, leaving room for future hikes.
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2024 revenue was up 6.6%, net income hit $2.7B, and VICI invested $1.1B, strengthening its Venetian partnership.
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With a P/E of 12.8, the multiple is attractive relative to the growth rate.
Is VICI Dividend Worth It?
Right now, it’s worth buying VICI as an income investor for the dividend that pays $1.70 in annual dividends and yields 5.2%. For reference, the average dividend yield across the S&P 500 is just 1.3 percent. Even a high-yield ETF like Vanguard’s VYM is only generating 2.6%, roughly half of what VICI is offering.
It’s also worth noting that VICI appears to have more room for dividend growth in the future. The company’s dividend payout ratio is 65%, so there’s definitely room to hike further.
Although VICI Properties is a fairly new firm, it has been able to deliver relatively strong dividend growth since its inception. On a 3-year basis, VICI has been able to raise its payouts at a compounded rate of almost 24% annually.
VICI Further Solidifies Venetian Partnership
2024 proved to be a good year for VICI Properties, with revenues climbing by 6.6 percent to a yearly total of $3.8 billion. The growth rate in Q4 was a bit slower at 4.7% year-over-year, but the net result was 21 consecutive quarters of revenue growth.
Net income growth of 6.6% in 2024 slightly eclipsed the sales figure, and resulted in total net income of $2.7 billion. This fact highlights one of VICI’s greatest strengths, which is its extremely high net margin. The lowest trailing 12-month net margin VICI has ever reported was 34% in Q2 of 2022. For the last year and a half, the number has averaged about 65-70%.
One negative that emerged in the Q4 report was a 17.6 percent drop in quarterly net income to $614.6 million. This decline, though, was primarily driven by a $157.7 million year-over-year change in current expected credit loss allowance. This change, albeit having a large impact on GAAP net income, didn’t appear to reflect any disruptions to the fundamentals of the primary business.
VICI also made progress on building its business in 2024. During the year, it made $1.1 billion in capital commitments and further cemented its partnership with the Venetian in Las Vegas. Under the agreement made last year, VICI will invest up to $700 million with the Venetian in exchange for the ability to increase rent under its current lease.
Can VICI Keep Growing Earnings Over Next 5 Years?
Over the next 3-5 years, analysts expect to see VICI’s earnings per share rise by about 3.7% a year. While this growth is modest, it’s a positive indicator that management will be able to sustain the dividend growth streak as earnings increase.
Looking further down the line, it appears that VICI Properties is set up well for long-term success. The flagship hotels and casinos the company owns are among America’s top experience travel destinations, a fact that will likely give the firm a high degree of staying power and a competitive moat.
These properties are also leased to well-established partners that are unlikely to suddenly find themselves in distress and unable to maintain their lease obligations.
Overall, the long-term prospects for VICI look quite good. As it goes from strength to strength earnings per share will likely rise slowly but steadily.
Over time, this will likely not only put a bit of upward pressure on share prices but also give management the ability to keep raising the company’s quarterly distributions.
Is VICI a Good Buy Now?
Shares of VICI are currently trading at fairly attractive prices that indicate undervaluation. The company’s P/E ratio is just 12.8, while the price-to-book is 1.3. Both of these multiples are fairly low for a company that is still young and growing.
While the price-to-sales multiple of 8.9 is on the high side, it’s important to keep in mind the extremely high net margins that VICI has been able to deliver on its revenues.
Over the coming 12 months, there’s even a decent chance that shareholders could see respectable returns in the price of VICI shares. Analyst price forecasts give the stock an average target of $35.57, 8.9% higher than the current price of $32.65.
Combined with the dividend, this would give VICI a total return of over 14%. It’s also worth noting that of the 17 analysts that have issued ratings on the stock, VICI has 14 buy ratings and 0 sell ratings.
All of this isn’t to say, however, that VICI is without its risks. Due to its deep ties to the hotel and casino industry, the company could see its growth slow in response to reduced vacation spending associated with an economic slowdown.
If sustained, the tariffs that went on this week could reduce US economic growth in 2025 by about 0.6%. This slower growth, combined with increases in consumer costs, could cut spending on non-essentials like vacations.
Overall, VICI is attractive for multiple reasons today. First and foremost is its high dividend yield, which provides about four times the income of the S&P 500 index. REITs also tend to be decent hedges against inflation, which is another probable outcome of current US trade policies.
In the long run, VICI’s partnerships with large, successful hospitality businesses will likely fortify. Taken together, it appears that VICI could be worthwhile both for its dividend and for its ability to grow over time.