VICI Properties: A High-Quality Casino REIT Stock (NYSE:VICI)
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VICI Properties owns and acquires casinos and hotels around the U.S. and collects rent from the operators based on a triple net lease. Since VICi's formation, it has grown at a rapid pace and they now hold an investment volume of $29.5 B.
During the pandemic, the market sentiment soured on the leisure and hospitality industry, but VICI still managed to collect rents from their high quality tenants. Now, as we leave the Pandemic and VicI's stock price will return close to its pre-pandemic level. V ICI is a great investment for a long-term dividend growth investor because it owns a strong portfolio that is well diversified on both a geographic and business basis.
VICI owns a very strong portfolio that is well diversified on both a geographic and business basis. They have a favorable lease structure with built-in growth and inflation protection.
VICI Properties owns the Venetian Resort, Harrah's, and Caesars Palace. They also own many premier hotels spread across the U.S., covering 15 different states and multiple markets. VICi has made several key acquisitions since formation. Some of the recent acquisitions include Venenian resort and MGM Growth.
VICI Properties has a good lease structure and good quality tenants. They have good locations and they have a stable cash flow. Their shares are outperforming the sector. They are expected to continue outperform the REIT index. The company has been performing better than the U.S. REITS index for the last 3 years.
VICI has strong financials and well managed debt. Management is targeting an investment grade rating from S&P, Fitch, and Moody's. Since formation, they raised $12 B of common equity and lowered their leverage from 8.5x of adjusted EBITDA to 3.2x.
VICI's valuation is at the lower end of the sector. The market sentiment toward the leisure and hospitality industry during the pandemic was negative. VICi's stock price hasn't recovered yet. However, after the end, the market's sentiment will improve and V ICI will perform better than the industry. I expect the stock to rise at least to match the median.
The Federal Reserve announced the interest rate hike schedule for the next couple of years: 6 times this year and 3 times next year. The rapid increase of the rate could cause an economic downturn and reduce travel and leisure spending. Rising interest rates will increase the financial cost, which will impact the funds available for acquisition of a new property.
VICI Properties owns several premier casinos in Las Vegas. They have a diversified portfolio due to strong tenants and a favorable lease structure. An economic downturn and high interest rates may slow growth somewhat, but Vici is positioned well for the long term.
