VICI Stock Looks Good With The 7% Yield!
Summary
Sven argues that VICI Properties (VICI) presents a compelling case for income-oriented investors, highlighting its 7% dividend yield and ownership of iconic Las Vegas properties like Caesars Palace and MGM Grand. Sven states that the fundamental metrics are strong, featuring a 100% occupancy rate, a net leverage ratio below five, and equity of $29 billion, which is higher than its current market capitalization. Sven notes that the market is currently pricing the stock at multi-year lows, effectively allowing investors to buy real estate below book value.
Sven explains that the primary pressure on the stock comes from rising interest rates, as the 10-year Treasury yield has moved from 1% to 4.7%, necessitating a higher yield from REITs. Sven states that while debt repricing will increase costs from 4.5% to approximately 5.7%, the company remains stable due to its master lease structures where tenants must default on all properties rather than individual ones. Sven points out that inflation escalators exist but are capped at 3-3.5%, which is a slight disadvantage in the current environment. Sven concludes that VICI offers a likely 7% return with medium risk and mentions that if the stock price drops another 30% due to even higher interest rates, Sven would view that as an opportunity to accumulate more shares.
Mentioned Stocks
Reasoning: Sven recommends VICI because of its 7% dividend yield, stable cash flows, and 100% occupancy rate. Sven states that the company trades below its book value of $29 billion equity. Sven notes that while interest rate hikes are a headwind, the underlying value of the Las Vegas real estate remains strong. Sven suggests that an entry point at the current 7% yield is attractive for long-term investors, though Sven warns that a rise in Treasury yields to 6.7% could push the stock down another 30%, which Sven would see as a further buying opportunity.