Many investors tend to fall into one of three camps. They focus on investing in growth, dividend, or value stocks. While all three strategies have their merits, combining approaches yields the best risk-adjusted returns.

The data backs up this claim. Over the last 50 years, dividend growers in the S&P 500 have delivered a higher total return (10.2% annualized) with less volatility (a beta of 0.88) than dividend non-payers (negative 0.6% total return and a beta of 1.22) and companies with no change in their dividend policy (6.6% total return and a beta of 1.01), according to data from Hartford Funds and Ned Davis Research. Because of that, investors should consider loading their portfolio with dividend growth stocks.

VICI Properties (VICI) certainly fits the bill. The experiential real estate owner pays a 5%-yielding dividend and delivers market-leading earnings growth.

Sector-leading growth

VICI Properties' growth profile was evident in the first quarter. The real estate investment trust's (REIT's) total revenue rocketed 110.7% year over year to $877.6 million. Meanwhile, its adjusted funds from operations (FFO) surged 73% to $528.6 million and grew by 18.6% on a per-share basis to $0.53. 

The company delivered leading per-share growth. CEO Ed Pitoniak commented on the first-quarter earnings call that the company believes its nearly 19% per-share earnings growth rate "will be among the highest for REITs generally and S&P 500 REITs specifically." He also noted, "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%."

The company benefited from a transformational year of growth in 2022. It acquired fellow gaming REIT MGM Growth Properties in a $17.2 billion deal. It also invested billions more in gaming and non-gaming properties. 

More growth is on the way

Pitoniak commented on the call, "It's not only about growth in current earnings, it's about growing our future earnings." He pointed out that "along that line," the company "allocated a total of $1.6 billion of incremental capital to compelling and accretive experiential property and lending investments" during the quarter. 

Meanwhile, VICI Properties continued to source new investments in the second quarter. It recently agreed to acquire four properties in Alberta, Canada, in a sale-leaseback transaction with Century Casinos. It's paying about $165 million in cash to grow its relationship with Century Casinos. The deal also furthers its international expansion after it entered the Canadian market earlier this year. 

The company is also actively studying new opportunities to drive its next wave of growth. In addition to gaming properties, COO John Payne noted on the first-quarter call that, "We continue to meet and build relationships with owners and operators in many sectors, including health and wellness, youth, collegiate and professional sports, various forms of family entertainment, theme parks, holiday parks, and other destination-based experiences."

Future acquisitions will provide incremental cash flow from a growing rental income stream. The company typically acquires properties secured by long-term net leases (NNN) that feature annual rental-rate escalation clauses, with most tied to the inflation rate.

The high-yielding and growing payout is on a rock-solid foundation

Growth is only part of the VICI Properties story. The company also pays an above-average dividend. Its 5% yield is above the S&P 500's 1.6% yield and the REIT sector's average of around 4%. 

That high-yielding payout is on a rock-solid foundation. VICI Properties generates very stable income backed by the long-term NNN leases securing its portfolio. Meanwhile, it has a conservative dividend-payout ratio for a REIT at about 75% of its adjusted FFO.

Finally, the company further supports its payout with a strong investment-grade balance sheet. It has a reasonable leverage ratio, fixed-rate debt with well-staggered maturities, and lots of liquidity.

The company's post-dividend free cash flow and balance-sheet capacity enables it to continue making new investments. Those features also allow the REIT to increase its dividend. It gave investors an 8% raise late last year and has increased its payout in all five years since its formation. Given the growth ahead, VICI Properties' high-yielding dividend should continue heading higher.

A powerful combination

VICI Properties has delivered outsized earnings growth, enabling the company to increase its above-average dividend. That one-two punch has enabled the REIT to significantly outperform the market (15.2% annualized total return versus 10.9% for the S&P 500) since its IPO in 2018. With more growth and income ahead, VICI Properties could continue producing winning results for its investors.