I expect VICI Properties (VICI -0.89%) to outperform Realty Income (O -0.74%) over the next five years. That's a bold prediction for someone as bullish on Realty Income as I am. It's because I believe VICI Properties is much cheaper relative to Realty Income right now.
Here's why I expect this top high-dividend REIT to outperform Realty Income stock over the next five years.
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Realty Income has a strong investment case
I want to be clear that I firmly believe Realty Income will be a strong investment over the next five years. The REIT has a diversified portfolio of durable properties (retail, industrial, gaming, and data centers). They provide it with resilient rental income to support its high-yielding monthly dividend (currently yielding over 5%). The REIT has a terrific track record of dividend growth, with 135 increases since its public market listing in 1994 and a 4.1% compound annual dividend growth rate.
I expect its growth to continue. Realty Income has a conservative dividend payout ratio (less than 75% of its adjusted funds from operations, or AFFO) and a strong investment-grade balance sheet (A-rating). It also has a growing list of strategic partners that provide growth capital and new investment opportunities, including Blackstone, which has closed two gaming investments with the REIT. I think Realty Income can continue growing its AFFO per share at a low- to mid-single-digit annual rate over the next five years to support continued dividend increases. Add that to its yield, and its total annual return could average around 10%, assuming no change in its valuation multiple.
NYSE: O
Key Data Points
The investment case for VICI Properties is even better
VICI Properties shares many similarities with Realty Income. It also invests in net lease real estate, though it focuses exclusively on experiential properties (i.e., gaming, hospitality, wellness, entertainment, and leisure destinations). It also has a strong dividend growth track record (every year since its IPO in 2018, at a net lease REIT-leading 7% compound annual rate) and a rock-solid financial profile (sub-75% AFFO payout ratio and an investment-grade balance sheet).
One core difference is the duration and inflation protection of its net leases. It typically invests in properties secured by very long-term leases (an average remaining lease term of 40 years), much longer than the 8-14-year average for net-leased properties. Meanwhile, an increasing percentage of its leases feature inflation-linked rental escalations (45% in 2026, rising to 87% by 2035), compared with the low fixed annual rent growth in most net leases. As a result, VICI Properties delivers faster same-store rent growth (1.7% in 2026, compared to the 0.4% sector average and 1.1%-1.3% for Realty Income). Add in acquisitions, and I think VICI can deliver mid-single-digit annual AFFO per share growth over the next five years.
NYSE: VICI
Key Data Points
Despite the similarities and the areas where VICI Properties stands above its peers, it trades at a much lower valuation than Realty Income (10.6x AFFO vs. 14.1x). That's why it has a higher dividend yield at nearly 7%.
Dual outperformance drivers
VICI Properties currently trades at a discount to Realty Income, even though it invests in properties with similar leases. I expect this discount to narrow over the next five years. Add that to its higher dividend yield, and I anticipate VICI Properties will produce a higher total return. While I own both REITs, I'd make a larger wager on VICI Properties right now because it could deliver bigger winnings over the next five years.
