Vici Properties (VICI +0.77%) owns one of the largest collections of gaming, hospitality, and entertainment destinations in the country. Its real estate portfolio features many of the most iconic casinos on the Las Vegas Strip, including Caesars Palace Las Vegas and The Venetian Resort Las Vegas. These properties produce very stable rental income backed by long-term triple net leases with the operating tenants, allowing the real estate investment trust (REIT) to pay a very attractive dividend that currently yields 5.6%.
While it's already a leading owner of experiential real estate, Vici Properties continues to find new ways to expand. That was clear last year, as it found several opportunities to put capital to work in generating additional income for investors. Meanwhile, it's already off to a good start in finding new sources of growth this year. Because of that, the REIT should have no trouble continuing to increase its high-yielding dividend.
NYSE: VICI
Key Data Points
The growth continues
Vici Properties recently reported its fourth-quarter and full-year results for 2024. The leading experiential REIT produced $2.4 billion, or $2.26 per share, of adjusted funds from operations (FFO), increases of 8.4% and 5.1%, respectively. That enabled the REIT to increase its dividend by another 4.2% late last year, its seventh straight increase since coming public in 2018. Vici has delivered peer-leading dividend growth of 7% annually, well above the 2.2% average of other REITs focused on owning net lease real estate.
The company benefited from rising rental income, as 40% of its leases link rents to inflation. With inflation still elevated, the REIT is capturing higher rental increases on those properties.
Vici Properties also announced $1.1 billion of new investments last year at a weighted average initial yield of 8.1%:
- Homefield: It agreed to provide a construction loan of up to $105 million to Homefield to fund the development of a Margaritaville Resort in Kansas City. As part of the deal, it received options to buy that resort, a new Homefield youth sports training facility, a new Homefield baseball center, and an existing Homefield youth sports complex.
- The Venetian Resort, Las Vegas: Vici Properties agreed to provide up to $700 million to The Venetian Resort for an extensive renovation project through its partner property growth fund strategy. In exchange, the rent on that property will increase to reflect the higher investment.
- Great Wolf Resorts: The REIT originated a $250 million mezzanine loan to Great Wolf Resorts, backed by a portfolio of nine properties.
Those new investments provided it with incremental income and some future growth potential.
Off to a good start in 2025, with more room to run
Vici Properties has continued to find new ways to invest in experiential real estate this year. It established a strategic relationship with Cain and Eldridge Industries dedicated to unique experiential real estate. The REIT's first investment will be a $300 million mezzanine loan related to the development of One Beverly Hills. The landmark mixed-use project will feature an all-suite Aman Hotel and Aman-branded residences, a refurbishment of the iconic Beverly Hilton, a curated collection of luxury retail and dining options, and botanical gardens.
The REIT's relationship-based investment approach should provide additional future investment opportunities. For example, it's collaborating with Cain and Eldridge to identify and pursue other experiential investment opportunities. Meanwhile, it has the option to acquire several properties developed by Homefield and many of its other partners via sale-leaseback transactions. It also has the opportunity to provide partners with funding for property enhancements (like The Venetian Las Vegas) and continue to make follow-on investments as its partners need more capital (e.g., it has now committed more than $720 million to Great Wolf across several transactions).
A great option for growth and income
Vici Properties has provided its investors with a lucrative, steadily rising income stream since it came public. While it's already a leader in its space, the REIT continues to find new ways to expand. Because of that, it should be able to continue growing its portfolio and dividend in the future. That makes it look like an excellent long-term investment opportunity for those seeking a rising passive income stream and price appreciation potential.
