I’m betting my retirement on dividend stocks. That’s actually a pretty low-risk wager, given the data on dividend stocks over the decades. They’ve outperformed non-payers by more than two-to-one (a 9.2% average annual return over the last 50 years compared to 4.3% for non-payers, according to data from Ned Davis Research and Hartford Funds).

One dividend stock I’m loading up on is Vici Properties (VICI). The real estate investment trust (REIT), which is focused on gaming and other experiential properties, currently pays a 5.6%-yielding dividend. I believe the REIT represents a low-risk bet because it should pay a steadily rising dividend, helping me continue to grow the value of my retirement account. That’s why I just bought more shares and plan to continue adding to my position in the future.

A great income experience
Vici Properties has one of the largest portfolios of gaming, hospitality, wellness, entertainment, and leisure destinations in the world. The REIT owns some of the most iconic casinos on the Las Vegas Strip, including Caesars Palace Las Vegas and the Venetian Resort Las Vegas. In addition to gaming properties, it owns other experiential properties, like bowling entertainment centers and Chelsea Piers in New York City. The REIT also has financing partnerships with several leading operators in the experiential sector, including Cabot, Great Wolf Resorts, and Lucky Strike Entertainment.

The REIT leases its owned portfolio under long-term triple net leases (NNN) with operating tenants. Those leases produce very stable rental income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. Its leases currently have a weighted average remaining term of 41 years and increasingly tie rents to inflation (40% in 2024, rising to 90% by 2035).

Vici Properties pays out about 75% of its stable cash flow in dividends each year. That gives it a nice cushion to protect the payout should one of its tenants experience financial issues. It also enables the REIT to retain meaningful cash to invest in new experiential properties that grow its income and dividend.

The REIT has raised its high-yielding dividend every year since its formation (last year was the seventh in a row). It has grown its payout at a 7% compound annual rate during that period. That’s the fastest pace among REITs focused on triple-net real estate (where the average dividend growth rate has been 2.2%).

Many ways to continue growing
Vici Properties already owns many of the top gaming properties in the U.S. It has 54 gaming properties across 15 U.S. states and one Canadian province, including 10 along the Las Vegas Strip. However, there are still many gaming properties it doesn’t own that it could buy in the future. For example, it has the right of first refusal to purchase several properties from Caesars, including Paris Las Vegas, Planet Hollywood Resort and Casino, and Horseshoe Casino Baltimore. It can also buy properties from other existing tenants and new operating partners.

However, buying casino properties is only one growth driver. The REIT has strategically provided funding to developers of other experiential property types, supplying it with an embedded acquisition pipeline. For example, it has the right to buy several Canyon Ranch wellness destinations, a couple of Cabot golf destinations, a Margaritaville Resort, and some youth sports facilities.

Vici Properties most recently inked a strategic relationship with Cain and Eldridge to develop unique experiential real estate. The first project is a $300 million investment in a mezzanine loan related to the development of One Beverly Hills, a landmark mixed-use development featuring an all-suite hotel, luxury residences, a curated collection of luxury retail and dining options, and botanical gardens.

The REIT sees many potential future investment opportunities to own and fund the development of new experiences. Notable existing and possible future property types include indoor waterparks, pro sports venues, live entertainment venues, theme parks, and alternative accommodations.

Vici Properties has a solid investment-grade balance sheet, which, along with its post-dividend free cash flow, gives it lots of liquidity to fund new investments. These investments will help grow the REIT’s sources of stable income, which should allow it to continue increasing its dividend.

A high probability of paying off
Vici Properties has been an excellent dividend stock over the years, growing its high-yielding payout at an above-average rate. I expect it to continue increasing its dividend in the future, which will help grow my wealth over the coming years. That’s why I continue to bet on this dividend stock, which I believe will deliver a big payoff in the long run.

— Matt DiLallo

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Source: The Motley Fool