VICI Properties Again Lifts AFFO Guidance

Posted on: October 31, 2024, 04:43h. 

Last updated on: November 1, 2024, 09:03h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

VICI Properties (NYSE: VICI), the largest owner of casino real estate, slightly increased its 2024 its 2024 adjusted funds from operations (AFFO) guidance for the second time this year.

Caesars asset sale
Caesars Palace on the Las Vegas Strip. Owner VICI Properties again lifted its 2024 AFFO guidance. (Image: CNN)

For at least the second time this year, the real estate investment trust (REIT) lifted its AFFO outlook for this year. This time, the owner of Caesars Palace on the Las Vegas Strip said it expects 2024 AFFO to be between $2.36 billion and $2.37 billion, or $2.25 and $2.26 per diluted share. Those projections are modestly above the $2.35 billion to $2.37 billion, or between $2.24 and $2.26 per share the REIT forecast in July.

In the third quarter, we continued to demonstrate the flow-through efficiency of our economic model, increasing our quarterly revenue by approximately 7% year-over-year and our AFFO per share by approximately 5% year-over-year,” said CEO Edward Pitoniak in a statement.

For the third quarter, VICI’s revenue rose 6.7% to $964.7 million as earnings per share jumped to 70 cents from 55 cents a year earlier.

VICI Increased Dividend in Q3

During the third quarter, VICI continued its tradition of boosting its dividend. Last month, the REIT increased its quarterly payout by 4.2%, marking the seventh consecutive year in which the company has lifted its distribution.

Each year since it was it was spun off from the old version of Caesars Entertainment (NASDAQ: CZR) in 2017, VICI has increased its dividend. Over that time, the payout has risen at a compound annual growth rate (CAGR) of 7%.

VICI’s commitment to payout growth is relevant because dividends are one of the primary reasons investors embrace REITs. As of the close of US markets on Thursday, the stock yields 5.30%, making it an attractive alternative to cash and short-term bonds.

Additionally, the casino landlord has the resources to extend that dividend growth in the future. It said it concluded the third quarter with $355.7 million in cash on hand and its rate of rent collection stands at 100%, indicating its tenants are in sound fiscal positions. That flowing rent coupled with inflation-linked increases is supportive of VICI’s dividend.

“Our methodical portfolio construction and consistent annual earnings growth from same-store rent escalations have funded our annual dividend increases, creating a compelling compounding opportunity,” added Pitoniak.

Lower Interest Rates Could Help VICI

Commercial real estate is a capital-intensive industry, underscoring why shares of companies such as VICI are highly correlated to Federal Reserve monetary policy. VICI’s $17.1 billion debt burden at the end of the third quarter confirms as much.

While that’s a big number, the REIT has $3.3 billion in liquidity and it’s expected that the Fed will continue paring interest rates well into 2025, potentially leading to lower financing costs for VICI.

Through a series of smart acquisitions, VICI is now the largest landlord on the Las Vegas Strip. It owns the real estate of Caesars Palace and the Venetian, and the property assets of nearly all of the Strip venues operated by MGM Resorts International (NYSE: MGM). The exceptions are Bellagio and Cosmopolitan.