Jeffries Analyst: Casino Landlords Among REIT Dividend ‘Hall of Famers’

• Gaming and Leisure and VICI are among Jefferies’ REIT dividend hall of famers
• The duo appear on the research firm’s Elite Eight of real estate payout stocks
• GLPI advanced to the Final Four

Borrowing some NCAA Tournament and other sports-related phrases, Jefferies analyst Jonathan Petersen recently examined dividend-paying real estate stocks, and the news is encouraging for a pair of casino landlords.

Moving directly to the research firm’s list of real estate investment trust (REIT) dividend “hall of famers,” Gaming and Leisure Properties (NASDAQ: GLPI) and VICI Properties (NYSE: VICI) make the cut. It’s illustrious company as just 15 stocks appear in that group.

As part of the analyst’s March Madness playbook, both Gaming & Leisure and VICI advanced to the Elite Eight where they squared off against each with the former cutting down the metaphorical nets to advance to the Final Four.

We expect GLPI to benefit from a diversified, high coverage tenant base and visible near-term growth driven in part by recent acquisitions at accretive cap rates,” observes Petersen. “In tandem with attractive rent coverage metrics, guidance towards healthy multi-year AFFO growth and a dividend yield north of 7% put GLPI among our top picks across Gaming and Lodging REITs.”

AFFO refers to adjusted funds from operations, which market participants use to gauge a REIT’s financial health, including its ability cover and grow dividends.

Casino REITs Have Impressive Dividend Histories

One of the biggest reasons investors evaluate REITs is dividends, but it’s not just about the asset class providing above-average yields. Real estate stocks are typically defensive, slower growth names so durable dividend growth is an avenue for enticing long-term investors.

“Of the 72 REITs that we analyzed over the past 15 years, only 28 have never cut their dividend,” adds Petersen.

“These 28 delivered an average total annual shareholder return over 15 years that was +964 bps higher than the average of the 44 REITs that had at least one dividend cut in that period. This level of outperformance is why we place such a strong emphasis on sustainable dividends.”

Neither Gaming and Leisure nor VICI are 15 years old as standalone public companies, but their current dividend trajectories may be signs of things to come. Importantly, neither is among the 83 REITs Jefferies says cut payouts over the past five years.

The ability of the casino landlords to sustain their dividends is crucial because REITs that did so or boosted their payouts over the past five years fared considerably better than their dividend-cutting counterparts.

Casino REITs Stand Tall Over Long-Term

Past performance isn’t a promise of future returns, but the track records of Gaming and Leisure and VICI are impressive. The Jefferies REIT Hall of Famers delivered an average compound annual growth rate in terms of returns of 5.7% over the past eight years, but the percentages for GLPI and VICI are 7.8% and 7.4%, respectively.

As Petersen points out, dividends play critical roles in REITs’ long-term return profiles. That could be good news for GLPI and VICI going forward.

“In our analysis of dividends paid by REITs over the past 15 years, we found that consistent and growing dividend payments drove the highest level of shareholder return,” Petersen states.

“Indeed, there is little correlation between the dividend yield at which a REIT traded at 15 years ago and the total shareholder return delivered over the next 15 years.” he concludes.