VICI Properties: Price Disconnected From Strong Fundamentals

Core Viewpoint - VICI Properties Inc is positioned as a strong investment opportunity due to its solid fundamentals, potential for significant growth, and a favorable dividend structure despite current market challenges [37][51]. Financial Performance - VICI reported a year-over-year revenue growth of 8.4% and an AFFO per share of $0.57 for Q1, indicating strong earnings power even in unfavorable conditions [41]. - The company has maintained a 100% rent collection rate since its inception, showcasing the quality of its tenant relationships [24][41]. - Current FFO estimates for Q2 are between $0.65 and $0.70 per share, with six positive revisions in the last 90 days [14]. Dividend Structure - VICI's current dividend yield is 5.3%, which is above its four-year average of 4.9% and comfortably covered by AFFO at a rate of 137.3% [15][38]. - The dividend has increased by 159.4% since the REIT's inception, with a compound annual growth rate (CAGR) of 7.62% over the last five years [15]. Portfolio Composition - VICI's portfolio consists of 13 tenants, with two tenants accounting for 74% of annualized cash rent, indicating a concentration risk [20][40]. - The company has a significant reliance on the Las Vegas region, which accounts for 47% of annualized rent from gaming properties [8][40]. - 81% of the portfolio has master lease protection, providing stability against vacancies [11]. Growth Potential - VICI has initiated investments in experiential properties, including a $212 million mezzanine loan to Kalahari Resort and $250 million in Great Wolf Lodge indoor water parks, indicating a strategy to diversify revenue streams [25][27]. - The company is exploring growth opportunities in sectors like waterparks, live entertainment venues, and theme parks, aligning with consumer trends favoring experiential spending [25][27]. Market Conditions - The real estate sector has been negatively impacted by rising interest rates, but there are indications that rate cuts may occur soon, which could benefit VICI [29][30]. - Historical data suggests that the federal funds rate is often adjusted during election years, which may lead to favorable conditions for VICI [30][31]. Valuation Metrics - VICI currently trades at approximately $30 per share with an estimated annual AFFO of $2.53, resulting in a price to AFFO ratio of 11.85x, significantly lower than peers [33]. - The estimated fair value of VICI is around $56 per share, indicating a potential upside of 86% from current levels if growth trajectories are maintained [6].