VICI Properties (VICI 0.73%) made a huge bet last year. It completed a transformational $17.2 billion merger with fellow gaming REIT MGM Growth Properties. On top of that, it secured several other acquisitions and investments in the gaming and nongaming sectors.

That gamble is paying big dividends this year. VICI Properties is delivering sector-leading earnings growth. That sets the stage for the REIT to continue growing its already above-average 4.7%-yielding dividend.

Delivering leading growth

VICI Properties recently reported strong first-quarter results. Its high-stakes shopping spree paid off handsomely. Revenue more than doubled while the REIT's adjusted funds from operations (FFO) grew 73% on an absolute basis and by nearly 19% per share. 

That's a leading per-share growth rate. CEO Ed Pitoniak put it into context on the company's first-quarter conference call. He said:

For Q1 2023, we generated year-over-year AFFO growth of 18.6% per share, a rate that we believe will be among the highest for REITs generally and S&P 500 REITs specifically. And to take a broader view, so far in earnings season, year-over-year Q1 2023 earnings growth for S&P 500 companies of all kinds is running at negative 4% versus VICI's Q1 AFFO growth again at 18.6%.

While the company's acquisitions are driving accelerated growth, it's also benefiting from the underlying resiliency of its legacy portfolio. VICI Properties owns a portfolio of world-class gaming properties leased to high-quality operators under long-term triple net agreements (NNN). That lease structure makes the tenant responsible for the variable costs of building insurance, real estate taxes, and maintenance. Because of that, they supply the REIT with very stable cash flow. Further, lease rates escalate each year, with 50% currently linked to inflation. With inflation still running hot, VICI Properties' rental income is growing faster.

Setting the stage for future growth

The company's recent spending spree gives it lots of momentum to continue growing at an above-average pace this year. However, it's not resting on its laurels. Pitoniak noted on the call that the company showcased in the quarter that "it's not only about growth in current earnings, it's about growing our future earnings." The CEO pointed out that the company "allocated a total of $1.6 billion of incremental capital to compelling and accretive experiential property and lending investments." VICI Properties made its first international acquisition, acquiring four gaming properties in Canada. It also bought out its partner's joint venture interest in two Las Vegas casino properties and expanded its funding partnership with Great Wolf Resorts. 

Even with all those investments, the company has plenty of liquidity to continue making investments. Pitoniak noted, "We have approximately $859 million of equity dry powder, thanks to our unsettled forward equity and approximately $650 million in cash. Combined that with $2.4 billion of undrawn revolver capacity and we have the funding in place to seize on further opportunity if opportunity presents itself in this current environment." 

The CEO stated that the company continues to build relationships with owners and operators of experiential real estate, which "have the potential to grow our business." He noted that relationships built in the past helped drive growth last year. He said, "Much of the work we are doing at VICI in 2023 is about growth in 2024, 2025, and beyond." While that doesn't mean its relationship-building won't pay more immediate dividends, the company is laying the groundwork for sustainable growth.

Future deals will enable the REIT to grow its adjusted FFO per share at a healthy clip. That will allow it to increase the dividend. VICI Properties has already raised its payout in all five years since its founding, including by 8% last September. 

A winning combination

VICI Properties is growing briskly these days. It's benefiting from the strength of its portfolio and last year's shopping spree. Those catalysts helped drive market-crushing total returns for VICI shareholders last year. It was the only REIT to deliver a positive total return in 2022 when the market was down sharply. 

The REIT expects to continue growing. It's continuing to build relationships that should drive growth in the future. Meanwhile, it has ample funding capacity to capitalize on opportunities as they arise. Future deals should grow the REIT's income and dividend, which could enable it to continue delivering market-crushing total returns.