VICI Properties (NYSE:VICI) is a real estate investment trust focused on experience real estate with prominent holdings of casino properties, most notably a group of Las Vegas icons that include Caesars Palace, the Luxor and the Venetian Resort.
As a result of owning these properties, VICI enjoys the strong moat that comes with leasing to large, successful businesses like MGM Resorts and Caesars Entertainment. How is VICI doing now, and where will the stock be in five years as the leadership team invests in its portfolio of prestige real estate?
VICI Chugging Along Nicely
VICI has turned in respectable numbers recently, with the Q1 report detailing 3.4 percent year-over-year revenue growth to $984 million.
Net income did decrease by 7.9 percent for the quarter due to a change in its credit loss allowance.
Adjusted funds from operations, however, ran counter to this trend, rising 5.9 percent to a quarterly total of $616 million.
It also invests in new projects, setting itself up for future revenue and AFFO growth. In Q1, for instance, management entered into a partnership that will see it invest $300 million into the One Beverly Hills development in Los Angeles.
VICI also agreed to invest $510 million into a resort and casino project in Madera, California, after the end of the quarter but before the quarterly report was released.
VICI’s Dividend Is Appetizing
VICI shares currently yield 5.4 percent and pay $1.73 annually. It’s useful to note that this is well-covered by balance sheet funds from operations, which totaled $0.51 per share in Q1 compared to a dividend payout of $0.43.
With AFFO expected to reach a yearly total of $2.33 to $2.36 for 2025, VICI appears to not only have the ability to safely cover its dividend but is also likely to raise it going forward.
Is VICI Undervalued?
At 12.6x earnings, VICI trades at a fairly modest P/E ratio that will likely leave room for its stock price to increase going forward. For reference, the average P/E ratio across REITs is about 30 times trailing earnings. The analyst price target for VICI is currently $36.12, implying an upside of just under 15 percent from the latest price of $31.47.
With that said, a glance at VICI’s dividend yield history suggests that the market is valuing it about as it always has against its ability to generate dividend income.
The yield has held in a fairly tight range of 4.5-5.5 percent throughout this decade so far, and today’s yield still falls toward the upper end of that range. So, while VICI Properties seems to be reasonably priced, the stock may also not be trading at a sharply discounted price today.
What Kind of Growth Could VICI See Going Forward?
Although VICI doesn’t directly run casino businesses, the underlying strength of the casino market when looking at a REIT that owns several of the properties. Fortunately, the casino market’s annual growth rate through 2030 is expected to average nearly 5 percent.
VICI’s EPS growth rate is expected to fairly closely follow this trend, rising at an expected rate of 4.5 percent over the next 3-5 years. The expected dividend growth rate over the next few years is a good bit lower at 1.8 percent, but projected trends seem to support both gradually higher share prices and a persistent increase in dividends.
Here, it’s worth keeping in mind the moat that VICI enjoys. Thanks to the prestige collection of properties, VICI leases to extremely well-established and well-capitalized businesses that are entrenched within their industry. And because VICI owns real estate instead of directly running casinos and other destination experiences, it is also somewhat insulated from boom and bust cycles.
There’s a decent chance that spending on vacations to premier Las Vegas casinos, as an example, will drop later this year in response to ongoing tariff uncertainty and price increases squeezing consumer budgets.
With that said, VICI isn’t especially exposed to these ebbs and flows in consumer spending as the casino operators to which it leases. The average lease duration of VICI’s properties is 40 years, creating a remarkably stable foundation for the business.
Barring massive unexpected upheavals in the gaming and experience industry as a whole, VICI Properties is going to be in a good spot to produce both short-term and long-term success.
Where Will VICI Properties Be in 5 Years?
With earnings only expected to rise modestly over the coming five years, investors won’t see explosive share price growth from VICI absent a major surprise.
Indeed, looking back over the past four years, we can see that VICI’s price has been more or less flat compared to the growth the market at large has seen during that time. Assuming that VICI rises more or less in line with the EPS growth that it is expected to deliver over that time, the stock would be trading at about $39.50 in five years.
Turning to the REIT’s dividend, a 1.8% growth rate sustained over five years would leave VICI paying $1.89 per share. It’s worth noting that this estimated dividend growth rate could prove to be too conservative, as VICI has successfully been able to raise its payout at much higher rates over the trailing 5-year period. With earnings projected to increase at a brisker pace, it’s entirely possible that management could choose to raise the dividend faster than expected.
Putting it together, VICI may only deliver modest share appreciation and dividend growth in the next few years. It’s worth noting, however, that this somewhat ignores the rather large returns from its current dividend.
Even with VICI only appreciating modestly for the next five years, the stock’s 5.4 percent dividend allows investors to either take a reliable stream of income from their holdings or reinvest their dividends to drive more rapid compounding growth.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.