Investors were optimistic this morning on the likelihood that Senate Democrats will accept Senate Republican leader Mitch McConnell’s proposal that would raise the debt ceiling temporarily.
“A temporary deal should help reduce debt ceiling related market volatility over the next few weeks as attention shifts towards December,” wrote Mark Haefele, chief investment officer of global wealth management at UBS.
A broad range of stocks was higher in early trading this morning as bargain hunters returned to look for deals among battered names. Our trade for today is for our long-term-minded readers who are looking to benefit from real estate’s potential for capital appreciation without the commitment that typically comes with investing directly in real estate.
Casino REIT, Vici Properties (VICI) currently owns 48 million-plus square feet of real estate across 28 properties (casinos, hotels, and golf courses) in 17 markets throughout the United States, including the world-famous Caesars Palace and Harrah’s Las Vegas.
The gaming REIT boasts an industry-leading weighted average lease term of 34.2 years, more than doubling that of the next triple-net lease REIT, Essential Properties Realty Trust (EPRT), which has a weighted average lease term of 14.3 years. Needless to say, this gives Vici Properties a tremendous amount of earnings stability. And if that wasn’t enough, Vici Properties possesses a flawless 100% occupancy rate.
Vici Properties’ adjusted funds from operations (AFFO) per share surged 10.8% from $1.48 in 2019 to $1.64 in 2020. This is during a time when many REITs saw their AFFO barely grow or even somewhat decline, which is a testament to the business models of Vici Properties and its tenants.
As the economy continues to recover from the pandemic and Vici Properties’ continues to expand its holdings, management said it believes that AFFO per share growth will ramp up even more in 2021. Vici Properties’ recent forecast of $1.82 to $1.87 in AFFO per share for this year would equate to a blistering 11% to 14% year-over-year growth rate compared to 2020.
Vici Properties recently hiked its dividend by 9.1% when it announced its acquisition of MGM Growth Properties (MGP) in a $17.2 billion deal. With an AFFO payout ratio that will fall in the low to mid 70% range this year, investors can rely on Vici Properties’ 4.8% dividend yield. Of 17 analysts offering recommendations for VICI, all 17 rate the stock a Buy. There are no Sell or Hold ratings for the stock. A median price target of $36 represents a 21.5% increase from its current price.
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