Here's How to Play VICI Properties Stock After 11.5% Fall in 3 Months

VICI Properties Inc. VICI has seen its stock decline 11.5% over the past three months, closing at $29.01 on Monday. This performance, though slightly better than the Zacks REIT and Equity Trust - Other industry’s drop, significantly lags behind the S&P 500 composite. Investors in VICI, a REIT specializing in gaming and entertainment properties, have been grappling with heightened uncertainty in the financial landscape, contributing to the stock’s recent underperformance. The Federal Reserve’s updated interest rate projections for 2025, signaling only two quarter-point reductions next year, have particularly impacted rate-sensitive REITs like VICI. REIT stocks rely heavily on debt financing and attract investors with high-yield dividends, making them vulnerable in an elevated interest rate environment. Furthermore, fears of higher inflation and potential policy shifts under the Trump 2.0 administration have added to market jitters, prompting cautious sentiment among investors regarding REITs.However, the recent sell-off has led VICI Properties to offer higher dividend yields, presenting an opportunity for investors. Its dividend now yields 5.96% after the recent sell-off. Nevertheless, before hastily deciding to remove this stock from your portfolio or rushing to buy after the dip, it’s important to evaluate whether this REIT has strong growth potential to sustain its dividend payments and assess whether the current concerns could significantly impact the company’s performance.Three-Month Price PerformanceImage Source: Zacks Investment ResearchWill VICI Stock Recover in 2025?With a portfolio including iconic assets like Caesars Palace Las Vegas, MGM Grand and the Venetian Resort Las Vegas and other market-leading gaming and experiential properties across North America, this experiential REIT is poised for a recovery in 2025. It enjoys a significant scale and access to capital. Here’s what can help the stock recover in the coming year.Robust Portfolio With Iconic Assets: VICI Properties owns 54 gaming and 39 experiential properties across North America, including iconic assets like Caesars Palace and MGM Grand on the Las Vegas Strip. Its portfolio benefits from high-demand, experience-driven destinations with long-term leases averaging 41 years. The company's 100% occupancy rate reflects the mission-critical nature of these properties to their tenants, who cannot easily relocate without significant cost and regulatory approval. These factors provide VICI with consistent, reliable income and a dominant position in a lucrative market.Inflation-Protected Cash Flow: VICI’s lease agreements feature contractual rent escalations, with 40% of rent roll CPI-linked as of 2024, projected to rise to 90% by 2035. This structure ensures the company’s cash flow grows alongside inflation, offering stability even in challenging economic conditions. Coupled with a creditworthy tenant base, including 74% of rent roll from S&P 500 tenants, VICI’s revenues are secure and transparent, making it a reliable choice for long-term investors.Proven Growth and Diversification: Since its inception in 2017, VICI has grown its adjusted EBITDA by 350% and expanded beyond gaming to include diversified experiential assets like Chelsea Piers and Bowlero. This strategic growth reduces risk from gaming-specific volatility while positioning VICI as a leader in the broader experiential real estate market. Its ability to execute growth strategies effectively demonstrates strong management and positions the company for sustained success.Attractive Shareholder Returns: VICI offers a competitive dividend yield of around 6%, supported by prudent capital management and stable adjusted funds from operations (AFFO) growth. With a 7% annual dividend growth rate since 2018, it outpaces many peers in the triple-net REIT sector like Agree Realty Corporation ADC, Essential Properties Realty Trust, Inc. EPRT and Gaming and Leisure Properties, Inc. GLPI. The company’s commitment to returning 75% of AFFO to shareholders ensures a steady income stream, making it an appealing option for dividend-focused investors seeking consistent returns and capital appreciation potential.Compound Annual Dividend Growth RateImage Source: VICI Properties Inc.Challenges to VICI Properties’ Growth StoryVICI Properties is not free of challenges. Despite its diversification efforts, gaming properties remain the cornerstone of VICI’s revenues, comprising a significant share of its tenant base. This concentration exposes the company to sector-specific risks, such as regulatory changes, economic downturns impacting discretionary spending or adverse developments affecting the gaming industry. Any financial instability among its major tenants could negatively impact VICI’s cash flows.Moreover, as a REIT, VICI is highly sensitive to interest rate fluctuations. Elevated interest rates increase the cost of debt and may erode the relative appeal of VICI’s dividend yield compared to risk-free Treasury yields.Estimate Revisions and ValuationThe recent estimate revision trends do not provide a clear direction either. The full-year 2024 and 2025 consensus mark for AFFO per share has remained unrevised over the past month.Image Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.In terms of valuation, VICI Properties stock looks cheap as it is trading at a forward 12-month price-to-FFO of 12.54X, below the REIT-Other industry average of 14.85X and lower than its one-year median of 13.34X.Forward 12 Month Price-to-FFO (P/FFO) RatioImage Source: Zacks Investment ResearchFinal Thoughts on VICIVICI Properties stands out as a leading dividend stock, offering a compelling mix of income and growth. A robust portfolio with iconic assets, inflation-protected cash flow, proven growth and diversification efforts support its dividend payment. However, expectations of rising inflation and interest rates may continue to weigh on investor sentiment toward REITs, including VICI.Although VICI Properties stock is currently trading at a discount compared to its industry, given the lack of upward estimate revisions, it would be prudent to wait for greater clarity on policy changes, inflation trends and their potential impact on VICI Properties before determining whether the current valuation signals a buying opportunity or underlying risks. Existing shareholders may choose to remain invested, given the company’s strong history of paying growing dividends and focusing on appealing property sectors.At present, VICI Properties carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report VICI Properties Inc. (VICI): Free Stock Analysis Report Agree Realty Corporation (ADC): Free Stock Analysis Report Gaming and Leisure Properties, Inc. (GLPI): Free Stock Analysis Report Essential Properties Realty Trust, Inc. (EPRT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks