Casino Landlord VICI Raises Its Dividend Again

With the stock down nearly 9% year-to-date even as the broader real estate sector is generating upside, VICI Properties (NYSE: VICI) shareholders haven’t had much to cheer about, but they received some good news late Thursday when the company announced another dividend increase.

In a statement released after the close of U.S. markets, the largest owner of casino real estate said it’s boosting its annual payout by 2.2%, elevating it to $1.84 per share.

The dividend hike announced today extends a streak in which the real estate investment trust (REIT) has boosted its payout every year since 2018 – its first full year as a standalone public company after being spun off from Caesars Entertainment (NASDAQ: CZR) in October 2017.

A Modest Though Important Dividend Increase

VICI’s latest dividend bump, though modest, is pertinent for various reasons, not the least of which it signals confidence in the REIT’s financial health even as the stock struggles. Second, dividends are the primary reason many investors engage with real estate equities, including VICI and Gaming and Leisure Properties (NASDAQ: GLPI) – the other publicly traded casino landlord.

Regarding long-term integrity of the dividend, VICI has that, too. The REIT’s adjusted funds from operations (AFFO) — a key metric of REIT dividend health — increased 4.6% in the June quarter. The payout ratio, or the percentage of earnings paid out in dividends, of 68.69%, according to Koyfin data, is below the high of 84% seen last year.

REIT payout ratios typically skew high because companies are required to distribute at least 90% of their taxable income to earn the tax breaks associated with being a REIT.

VICI’s dividend increase is relevant for another reason. With the stock already yielding over 7% and the payout growing, it may be a compelling alternative for income investors at a time when 10-year Treasury yields hover around 4.77%.

Still No Caesars Update

VICI investors will likely take the dividend hike, but many are likely pondering the state of talks between the REIT and Caesars regarding potential adjustments to their regional casino master lease.

That’s widely viewed as the primary overhang on VICI stock with some analysts pointing to some likelihood that VICI ultimately lowers the rent on several of the Caesars regional casinos it owns, though the REIT will be compensated for such an adjustment.