Vici Properties Set for Continued Growth and Dividend Increases in 2024

Dhaneshwar Prasad

Vici Properties (NYSE: VICI) owns some of the most iconic properties in the world, including famous casinos along the Las Vegas Strip like Caesars Palace, MGM Grand, The Venetian, and more. But while gambling giants like Caesars Entertainment (NASDAQ: CZR) and MGM Resorts (NYSE: MGM) operate these casinos, Vici merely serves as landlord.

As real estate investment trust (REIT), Vici owns the buildings and lands, then leases them back to casino operators and collects steady rental income. This unique business model provides recession-resilient revenue, steady dividend growth, and exciting expansion opportunities. Here’s why income investors should take note of Vici Properties heading into 2024.

Recession-Resilient Business Model

One of the biggest advantages of being a casino landlord rather than operator is that rental revenue remains steady regardless of economic conditions or tourist visits. This was clearly demonstrated in 2020 during the Covid-19 pandemic and casino shutdowns.

Despite many tenants being forced to close for months, Vici continued collecting 100% of rents owed. Its lease agreements contain strong protections, including master leases, cross-default provisions, and corporate guarantees. As a result, Vici could maintain its dividend through the pandemic while many casino operators cut theirs.

Heading into a potential recession in 2023 or 2024, Vici’s rental income should prove far more stable than gambling revenue. With average remaining lease terms of 42 years, it also doesn’t face the same re-leasing risks of traditional REITs focused on office buildings or retail spaces. Vici’s business model is simply better positioned for economic uncertainty.

Impressive Dividend Track Record

Vici Properties only went public in 2018, but it has already demonstrated a stellar commitment to dividend growth in its short trading history. It has increased its dividend every single year since inception, even during the pandemic.

Over the past three years, Vici has grown its dividend at a compound annual rate exceeding 10%. This already outpaces most gaming REITs and many REITs in general. But heading into 2024, Vici appears capable of maintaining double-digit dividend growth.

Much of this is made possible by the REIT’s inflation-linked leases. Nearly all of Vici’s leases contain escalation clauses tied to CPI growth, with a floor of 2% and ceiling of 4% annual rent increases. This provides an organic tailwind for rental income growth needed to increase the dividend, especially with inflation running hot.

Vici’s dividend yield already tops 5%, offering a compelling starting income stream. But expected double-digit dividend growth provides both inflation protection and exponentially increasing income over time.

Expanding Beyond Casinos

While owning world-famous casinos provides a steady, recession-proof foundation, Vici has bigger ambitions than just gambling. The REIT is aggressively expanding into hospitality, entertainment, and experiential real estate categories.

Recent deals include buying the famed Chelsea Piers New York sports complex, Topgolf driving ranges, and Great Wolf Lodge resorts. Vici is also targeting hotels, water parks, bowling alleys, and other experience-focused properties with similar recession-resilient attributes.

Internationally, Vici is exploring integrated resorts and casinos in places like Japan, Korea, and Greece where gaming markets are opening up. This worldwide expansion provides new avenues for sustained growth.

By branching out beyond just the core casino properties, Vici amplifies its opportunities to deploy capital into new acquisitions. More acquired properties translate into higher rental income to support further dividend increases. Investors in 2024 should see the benefits of this expansion strategy.

Outlook for 2024

Heading into 2024, income investors would do well to consider Vici Properties. Its recession-resilient business model held up remarkably well even in the worst economic downturn. Rental income should prove far more stable than casino operator revenue in the event of another recession.

Vici’s dividend track record and growth outlook are equally impressive. With inflation-linked leases providing a built-in tailwind, double-digit dividend growth seems likely to continue. Add a starting yield over 5% and Vici offers both substantial current income and exponential growth.

Lastly, the REIT’s move into new property categories provides new avenues for acquisitions and growth. While the casino properties remain the crown jewels, expansion into hotels, entertainment, and other experiential properties diversifies the rental income stream.

Overall, Vici Properties looks well-positioned to continue its success into 2024 and beyond. Income investors looking for both stability and growth would be wise to consider this unique REIT.

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Former Sony professional turned multi-business owner and stock investor, Dhaneshwar leverages his MBA to produce market, IPO and biz content and personal investments on
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