Financial reporters Charles Dow and Edward Jones launched their eponymous index in 1896, following the fate of 12 of America's largest industrial and commercial concerns. Today the Dow Jones Industrial Average comprises 30 major companies that represent a cross-section of the economy and it serves as a snapshot and benchmark for millions of investors around the world.
Of course, there are stocks that have outperformed the Dow, and one to consider now is a major owner of casinos and other experiential locales. Vici Properties (VICI -0.28%) is a real estate investment trust (REIT) that was spun off during the bankruptcy reorganization of Caesars Entertainment. Vici owns the properties and leases them back to the operators under long-term deals and then, as required by tax law, distributes at least 90% of its taxable income as dividends.
It's a business that has worked out very well so far for Vici and shareholders of this real estate dividend stock.
VICI Total Return Level data by YCharts
Growth and diversification spreads the bets
As the chart above shows, Vici has easily outpaced the Dow, as measured by total return, since the REIT's debut on the Big Board on Feb. 1, 2018. It's grown a $1,000 stake to more than $1,700 compared with about $1,400 for the benchmark SPDR Dow Jones Industrial Average ETF exchange-traded fund.
The holdings have grown, too. When Vici went public in February 2018, it owned 20 properties in nine states, comprising about 36 million square feet that included nearly 14,000 hotel rooms and more than 150 bars, restaurants, and nightclubs. That was along with four championship golf courses and 34 acres of undeveloped land adjacent to the Las Vegas Strip.
Vici still owns four golf courses and that valuable piece of empty Vegas real estate, and a portfolio that has grown to about 125 million square feet comprising 54 gaming properties, 38 non-gaming experiential properties, and more than 500 restaurants, bars, clubs, and sportsbooks. They're spread across the U.S., but the headline properties are still in Vegas, where Vici now owns the Venetian Resort and MGM Grand.
While not as diversified as a Dow index, Vici is spreading its bets. Most recently, the REIT announced a sale-leaseback deal with Bowlero for 38 of that company's more than 300 bowling centers across North America.
Dividend growth and a promising future
Income-seeking investors should also be pleased that Vici has consistently yielded at or above 5% since its inception, compared with about 2% for the Dow over that time. The REIT has raised its dividend every year as well, most recently to $0.415 per share in September. That brings the annual amount to $1.66 a share, good for a nice 6.4% increase from the previous dividend rate.
That $1.66 a share is handily covered by the $2.11 to $2.14 per share in adjusted funds from operations that Vici said this summer it expects for full-year 2023. Analysts give the stock a consensus target price of $35.36, a nearly 30% upside from current trading levels of about $27.70.
The long-term nature of its leases and the resilience of the gaming industry, especially among those top brands and destinations, points to more Dow-beating performance ahead for Vici. A current yield of about 6% is attractive, too. I have a small stake in this REIT and plan to add to it over time.
