Key Points
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Vici’s sticky leases and perfect occupancy rate make it a top REIT to own.
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It looks undervalued, and it pays a generous forward dividend yield of 7.3%.
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Over the past two months, many dividend stocks pulled back after the Fed’s first rate hike in three years boosted the 10-year Treasury’s yield to its highest levels since 2007. That trend drove issuers of CDs, bonds, and other fixed-income investments to raise yields to remain competitive, drawing investors away from riskier, lower-yielding dividend stocks.
After peaking at 5.31% on Oct. 5, the 10-Year Treasury’s yield has pulled back to about 4.83%. Many dividend growth stocks still look unappealing in this environment. However, I’d still be comfortable putting $10,000 into Vici Properties (NYSE: VICI), an experiential real estate investment trust (REIT) that owns casinos, resorts, and other entertainment properties.
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What does Vici Properties do?
As a REIT, Vici purchases properties, rents them out, and splits its income with its investors. It must distribute at least 90% of its taxable income as dividends to maintain a lower tax rate.
Vici was spun out from Caesars Entertainment (NASDAQ: CZR) in 2017. It now owns 103 experiential assets (63 gaming properties and 40 non-gaming properties) across North America.
Its two largest tenants are Caesars Entertainment and MGM Resorts (NYSE: MGM), which together account for roughly 70% of its rent. By locking its tenants into multi-decade leases, Vici has maintained a 100% occupancy rate ever since its 2018 IPO. By pegging most of its leases to the Consumer Price Index (CPI), it can raise its rental rates to keep pace with inflation. As a triple-net lease REIT, its tenants cover their own maintenance, insurance, and property taxes.
Why is Vici’s stock under pressure?
From 2020 to 2025, Vici’s adjusted funds from operations (AFFO) per share increased from $1.55 to $2.38, while its dividends per share grew from $1.33 to $1.79. For 2026, it expects its AFFO per share to rise to $2.47-$2.48, easily covering its forward dividend of $1.84 per share (a 7.3% yield). It also raised its dividend for the ninth consecutive year this September.
However, Vici’s stock is still down 17% over the past 12 months. At $25, its stock looks undervalued at 10 times this year’s AFFO per share. It’s under pressure because most of its tenants struggle when inflation is hot and discretionary spending is weak.
Yet none of its top tenants are in danger of going bankrupt. It also structures its leases as master leases, meaning its tenants can’t default on a single underperforming property while keeping profitable ones open. So even though Caesars and MGM might struggle in this challenging market, they’ll still keep paying Vici and its investors. That’s why I’d be willing to invest another $10,000 into Vici — which already accounts for 3.7% of my portfolio.
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Leo Sun has positions in Vici Properties. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.
