This Stock Has the Highest Dividend Yield in the S&P 500. It Just Raised Its Dividend Again.
Key Points
Vici Properties is raising its dividend by another 2.2%, continuing the trend that began when it went public in 2018.
It currently has the highest dividend yield in the S&P 500 at over 7%.
The REIT backs its payout with a world-class portfolio and rock-solid financial profile.
Vici Properties (NYSE: VICI) is at it again. The owner of market-leading gaming, hospitality, wellness, entertainment, and leisure destinations is raising its dividend by another 2.2%, bringing the annualized payment to $1.84 per share. The real estate investment trust (REIT) has now raised its payout every year since going public in 2018. Its latest raise will boost its already leading dividend yield, which, at its recent closing share price of $25.65, now stands at 7.2%. That's the highest dividend yield in the S&P 500.
Here's how this high-dividend REIT can afford to continue raising its payment.
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Backed by a world-class portfolio
Vici Properties currently owns over 100 experiential properties leased to 16 tenants. While 70% of its rent comes from only two tenants, they include some of the most iconic gaming properties on the Las Vegas Strip.
The REIT leases its properties under triple-net leases with a weighted-average remaining term of nearly 40 years. Its leases feature strong protections, including inflation-linked rental rate increases (45% this year, rising to 87% by 2035). In addition to its owned real estate portfolio, Vici Properties has a growing real estate-backed loan portfolio (nearly $4.3 billion of total commitments at a 9.2% blended interest rate). While these aren't risk-free investments, they should provide the REIT with very stable income to support its high-yielding dividend.
At its recently raised dividend rate, Vici Properties' payout ratio will be around 75% of its estimated adjusted funds from operations, at the low end of its 2026 guidance range. That will enable it to retain nearly $700 million in cash to fund new investments. The REIT also has a rock-solid investment-grade balance sheet, with leverage currently at the low end of its 5.0x-5.5x target range. That's providing it with the financial flexibility to make new investments to support its dividend. It recently closed a $1.2 billion sale-leaseback transaction, adding seven new casino properties, and acquired a beach resort in a $75.5 million build-to-suit redevelopment deal.
These and future new investments should support continued dividend growth, making it an attractive high-yield stock to buy.
Matt DiLallo has positions in Vici Properties. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.