Shares of VICI Properties Inc. VICI were down 5.1% in the past three months. This performance, though slightly better than the Zacks REIT and Equity Trust - Other industry’s drop, significantly lags behind the S&P 500 composite.

Like other REITs, VICI Properties, which specializes in gaming and entertainment properties, has been subject to investors’ concerns as the narrative with respect to rates has changed. As expected, on Wednesday, the U.S. Federal Reserve decided to hold off on further interest rate cuts following three straight cuts since September 2024, signaling a cautious stance on additional cuts for the year. 

The decision reflects a wait-and-see approach to assess the policies that President Donald Trump may implement. On Thursday, Trump already reaffirmed his plan to impose a 25% tariff on imports from Mexico and Canada.

However, solid dividend payouts remain the biggest attraction for REIT investors. The recent sell-off has driven VICI Properties to offer higher dividend yields, presenting a potential opportunity for investors. Its current dividend yield stands at 5.84%. However, before making any hasty decisions to sell or buy after the dip, it’s essential to assess whether this REIT has the growth potential to sustain its dividend payments and evaluate whether the current concerns could significantly affect the company's long-term performance.

Three-Month Price Performance

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Are VICI Properties’ Growth & Dividend Sustainable?

Attractive dividend payouts continue to be a key draw for REIT investors, and VICI Properties offers a compelling roughly 6% dividend yield. Since 2018, VICI has maintained an impressive 7% annual dividend growth rate, surpassing many competitors in the triple-net REIT space, including Agree Realty Corporation ADC and Essential Properties Realty Trust, Inc. EPRT and Four Corners Property Trust, Inc. FCPT. With a target of distributing 75% of adjusted funds from operations (AFFO) to shareholders, VICI provides a reliable income stream, making it an attractive choice for dividend-focused investors seeking stability and long-term appreciation.

What is encouraging is that this payout rests on a solid and reliable footing as VICI Properties has cemented itself as a premier experiential real estate investment trust (REIT) with a high-quality portfolio of gaming and entertainment assets. With flagship properties like Caesars Palace Las Vegas, MGM Grand, the Venetian Resort Las Vegas and other market-leading gaming and experiential properties across North America, VICI is well-poised for growth amid the resiliency of the American consumer, especially in their demand for experiential activities.

VICI owns 54 gaming and 39 experiential properties across North America, all secured by long-term, triple-net leases with an average duration of 41 years. The company maintains a 100% occupancy rate, underscoring the mission-critical nature of its properties to tenants who face significant regulatory and financial hurdles if they attempt to relocate. This ensures VICI receives stable rental income, providing a strong foundation for consistent dividend payments.

A major factor in VICI’s dividend sustainability is its lease structure. As of 2024, 40% of its rent roll is CPI-linked, with expectations that this will increase to 90% by 2035. This inflation-linked rent growth helps the company maintain purchasing power and revenue expansion, even in inflationary environments. Additionally, 74% of VICI’s rent roll comes from S&P 500 tenants, enhancing income stability and creditworthiness.

Since its inception in 2017, VICI has expanded its adjusted EBITDA by 350%, growing beyond gaming properties to include experiential assets like Chelsea Piers and Bowlero. This diversification reduces sector-specific risks and enhances revenue reliability. Moreover, the company enjoys financial resilience with $3.3 billion in liquidity as of Sept. 30, 2024, giving it ample financial flexibility to navigate market fluctuations. The company’s last quarter annualized net leverage ratio stood at 5.4, within its long-term target range of 5.0-5.5.

Headwinds to Consider Before Choosing VICI Stock

VICI Properties faces its share of challenges. Despite ongoing diversification efforts, gaming properties continue to be the primary driver of its revenues, accounting for a substantial portion of its tenant base. This concentration makes the company vulnerable to industry-specific risks, including regulatory shifts, economic downturns that impact discretionary spending and unfavorable developments within the gaming sector. Any financial distress among its key tenants could potentially strain VICI’s cash flows.

As a REIT, VICI is particularly susceptible to interest rate fluctuations. Elevated interest rates keep borrowing costs high and could diminish the attractiveness of its dividend yield relative to risk-free Treasury yields. Uncertainty in REIT markets, amid fluctuating interest rates and unpredictable credit conditions, remains a key concern for investors.

VICI’s Estimate Revisions and Valuation

The recent estimate revision trends do not provide a clear direction either. The full-year 2024 and 2025 consensus mark for AFFO per share has remained unrevised over the past month.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

In terms of valuation, VICI Properties stock looks cheap as it is trading at a forward 12-month price-to-FFO of 12.88X, below the REIT-Other industry average of 14.69X and lower than its one-year median of 13.12X.

Forward 12 Month Price-to-FFO (P/FFO) Ratio

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Final Thoughts on VICI

VICI Properties remains a compelling dividend stock, supported by its high-quality portfolio, inflation-protected cash flows and disciplined growth strategy. While its long-term fundamentals appear strong, macroeconomic headwinds such as rising inflation and interest rates may continue to impact investor sentiment toward REITs.

While VICI Properties stock is trading at a discount relative to its industry, the absence of upward estimate revisions suggests that patience may be warranted. Waiting for more clarity on policy changes, inflation trends and their potential effects on the company could help determine whether the current valuation presents a buying opportunity or reflects underlying risks. However, existing shareholders may find it worthwhile to stay invested, given VICI’s strong track record of dividend growth and focus on attractive property sectors.

At present, VICI Properties carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Agree Realty Corporation (ADC) : Free Stock Analysis Report

Four Corners Property Trust, Inc. (FCPT) : Free Stock Analysis Report

VICI Properties Inc. (VICI) : Free Stock Analysis Report

Essential Properties Realty Trust, Inc. (EPRT) : Free Stock Analysis Report

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