2024-07-21 08:00:00 ET
Summary
- VICI Properties stock is a strong buy due to efficient capital management, growth potential, and consistent performance in a challenging environment.
- The REIT's portfolio is strategically crafted with exposure to experiential properties, triple net leases, and parent guarantees, reducing risk and increasing stability.
- Anticipation of interest rate cuts, potential growth catalysts, and undervaluation compared to peers make VICI an attractive investment with significant upside potential.
- Earnings will be reported at the end of July and I anticipate a positive report as a result of VICI's debt investments.
- VICI stock's current dividend yield sits at 5.4% and is comfortably covered by FFO.
VICI Properties Overview
VICI Properties ( VICI ) remains one of my strongest conviction buys within the real estate sector due to its efficient capital management, strong growth potential, and consistent performance in an environment that is generally unfavorable. VICI operates as a REIT that maintains exposure to experiential properties within the gaming and activities sector. Just to give you an idea of some tenants, VICI provides properties for MGM Resorts ( MGM ), Bowlero ( BOWL ), and Caesars Entertainment ( CZR ). I previously covered VICI Properties and rated it as a strong buy due to its strong fundamentals, but this time around, I wanted to discuss the future outlook and potential catalysts. While REITs aren't typically known for their growth, I believe that we have the opportunity to capture large double-digit upside growth.
We can see that the real estate sector continues to be one of the worst performing sectors over the last three years. This can be attributed to the Fed aggressively hiking interest rates to their decade high. REITs typically thrive in lower interest rate environments since they are very capital intensive businesses that can fuel research, acquisitions, new developments, and improve operational efficiencies by using cheap debt. However, I believe that the higher interest rates have heavily suppressed VICI's potential to shine through as one of the highest REITs in the sector. I noticed economic indicators that signal a potential change in interest rates may happen soon....
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VICI Properties: Price Disconnected From Strong Fundamentals