What Sell-Off? 4.9%-Yielding VICI Properties Stock Near Record Price
Why VICI Properties Inc Is Bullish
The lower a dividend stock falls in price, the higher it rises in dividend yield. Right now, finding a high-yield dividend stock isn’t difficult. What’s getting tougher to find, though, are bullish, high-yield dividend stocks trading near record prices. One of the best ones right now is VICI Properties Inc (NYSE:VICI).
VICI Properties is one of the largest owners of gaming, hospitality, and entertainment destinations in the U.S. As of February, its portfolio comprised 43 properties, approximately 58,000 hotel rooms, more than 68,000 gaming units in 15 states. Its properties include Caesars Palace Las Vegas, Caesars Atlantic City, Mandalay Bay, The Mirage, and MGM Grand. (Source: “Investor Presentation,” VICI Properties Inc, February 25, 2022.)
Moreover, the real estate investment trust (REIT) has plenty of room for growth; it owns 34 acres of undeveloped land in Las Vegas.
Following the lifting of COVID-19-related restrictions, tourists have been flocking back to entertainment destinations like Las Vegas. Nevada casinos brought in $1.35 billion in March, just shy of the record $1.36 billion they generated in July 2021. (Source: “Monthly Win and Percentage Fee Tax Collections,” Nevada Gaming Control Board, April 28, 2022.)
Acquisition of Venetian Resort Las Vegas
In February, VICI Properties completed its $4.0-billion acquisition of the Venetian Resort Las Vegas, the largest single hotel facility in the U.S. The resort ran at 100.3% occupancy in the fourth quarter of 2021. (Source: “VICI Properties Inc. Completes $4 Billion Acquisition of the Venetian Resort Las Vegas,” VICI Properties Inc, February 23, 2022.)
The Venetian Resort includes three hotel towers with 7,092 suites and 225,000 square feet of gaming space of gaming space. At 2.3 million gross square feet of exhibition and meeting space, the resort is the biggest private-sector convention and trade show facility in the U.S.
Simultaneous with the closing of this transaction, VICI Properties Inc entered a triple-net lease agreement for the Venetian Resort. The lease has an initial annual rent of $250.0 million and an initial term of 30 years, with two 10-year tenant renewal options. Rent under the lease will escalate at the greater of two percent or in conjunction with the consumer price index (subject to a three-percent ceiling), beginning at the earlier of lease year three or when the Venetian Resort achieves certain financial milestones.
Acquisition of MGM Growth Properties LLC
On April 29, VICI Properties announced that it had closed its previously announced $17.2-billion acquisition of MGM Growth Properties LLC. (Source: “VICI Properties Inc. Completes $17.2 Billion Strategic Acquisition of MGM Growth Properties LLC,” VICI Properties Inc, April 29, 2022.)
With this acquisition, VICI Properties’ portfolio gains 15 of the most popular Las Vegas and regional properties to its portfolio and increases the number of its resorts in Las Vegas to 10. The deal also makes VICI Properties the largest owner of hotel and conference real estate in the country.
This acquisition increases VICI Properties Inc’s annual rents by more than $1.0 billion and increases its estimated enterprise value to approximately $44.0 billion.
The company will maintain MGM as a tenant. VICI Properties entered an amended and restated triple-net master least with MGM Resorts International (NYSE: MGM). The initial term is for 25 years, with three 10-year tenant renewal options and initial annual rent of $860.0 million.
VICI Properties Inc will hike the rent at a rate of two percent annually for the first 10 years of the lease and then at the greater of two percent per year or in conjunction with the consumer price index (subject to a three-percent cap).
2021 Q4 AFFO Up 10.8% & Full-Year AFFO Up 25.3%
Thanks to VICI Properties’ massive, diverse property portfolio and the return of tourists to Las Vegas, VICI Properties has been reporting fabulous financial results. (Source: “VICI Properties Inc. Announces Fourth Quarter and Full Year 2021 Results,” VICI Properties Inc, February 23, 2022.)
In the fourth quarter ended December 31, 2021, the REIT’s total revenue inched up by 2.7% year-over-year to $383.2 million. Its net income in the quarter was $281.5 million, or $0.44 per share. VICI Properties Inc’s adjusted funds from operations (AFFO) in the fourth quarter of 2021 climbed by 10.8% year-over-year to $278.9 million, or $0.44 per share.
The company’s full-year 2021 revenue went up by 23.2% year-over-year to $1.5 billion. Its full-year net income came in at $1.0 billion, or $1.76 per share. Its full-year AFFO, meanwhile, went up by 25.3% to $1.0 billion, or $1.82 per share. During the year, VICI Properties Inc had record acquisition volume of $21.0 billion, completed two equity raises with an aggregate value of $5.4 billion, and repaid its $2.1-billion term loan facility, eliminating all outstanding secured debt.
For fiscal 2022, VICI expects to report AFFO in the range of $1.31 billion to $1.34 billion, which translates to AFFO per share in the range of $1.80 to $1.84.
VICI Properties Inc Increased Dividend 9.1% Year-Over-Year
As a REIT, Properties has to return virtually all of its earnings to investors, which it does in the form of high-yield dividends. Last December, the company’s board declared a regular quarterly dividend of $0.36 per share, for a yield of five percent. This represents a 9.1% increase on a year-over-year basis. (Source: “VICI Properties Inc. Declares Regular Quarterly Dividend,” VICI Properties Inc, December 9, 2021.)
Thanks to a record number of acquisitions, significant AFFO growth, and a strong outlook, VICI Properties stock has been bucking the stock market sell-off. As of this writing, VICI stock is up by:
- Three percent over the last month
- 6.5% over the last three months
- 2.8% over the last six months
- 0.1% year-to-date
Those numbers might not sound earth-shattering, but in comparison, the S&P 500 is down by:
- 8.3% over the last month
- 6.8% over the last three months
- 10.5% over the last six months
- 12.5% year-to-date
The Lowdown on VICI Properties Stock
Vici Properties Inc owns one of the world’s most dynamic gaming and entertainment property portfolios on the planet. As described earlier, the company had a transformational 2021 with record acquisition volume of more than $21.0 billion.
Vici Properties successfully accessed the equity capital markets with two of the biggest REIT follow-on equity offerings ever executed, and it has eliminated all outstanding secured debt. The company also recently closed on its acquisition of the Venetian Resort, giving it ownership of the largest single hotel facility and largest private sector convention center in the U.S.
Thanks to high fourth-quarter and full-year 2021 AFFO growth, the company was able to increase its quarterly dividend by 9.1% year-over-year. Vici Properties Inc’s strong guidance supports the likelihood of another big pay raise for investors in 2022.