If you're a long-term investor, the short-term rush brought on by gambling probably doesn't appeal to you all that much. But that doesn't mean other people don't like to gamble. In fact, there is a huge industry that focuses largely on providing access for gamblers.
One of the most notable gambling access points can be found in Las Vegas. That also happens to be where you'll find nearly half of Vici Properties' (NYSE: VICI) casino properties, some of which are iconic for those with any knowledge of gambling. Vici Properties is a real estate investment trust (REIT) that benefits from the popularity of gambling. And it has been pretty successful for itself and its investors.
Here are three reasons why long-term investors will want to take a close look at buying Vici Properties.
The most important thing to understand about Vici is that it is not a casino operator. It is a landlord that specializes in owning casino properties. While the casino business waxes and wanes along with the broader economy (making the business cyclical by nature), the buildings in which casinos exist aren't at all cyclical. The gaming industry is highly regulated and it is actually quite difficult to open, let alone operate, a casino.
When a successful casino is operating, the property itself becomes valuable and remains so even if the casino business isn't. Since real estate investment trust (REIT) Vici owns the property, it owns what might be the most valuable asset of that casino. Indeed, it isn't uncommon for a casino in Las Vegas to shut down only to see a brand new casino rise from the ashes in the same location.
A great example of the importance that casino properties play in the puzzle comes from the coronavirus pandemic. During that difficult and uncertain period, casinos were shut down for a spell. And even after they reopened it took a while for customers to get comfortable returning to the card tables and slot machines. But Vici's tenants didn't stop paying their rent. The fact that the REIT increased its dividend in 2020 despite the pandemic headwind is evidence.
No casino operator wants to lose access to its highly productive properties because it failed to pay the rent, even during weak patches. That, in turn, makes Vici's business a more dependable way to invest in the sector than owning a casino operator.
Stocks in the S&P 500 index average a relatively tiny dividend yield of 1.2% today. The average REIT's dividend yield is 3.8%. Vici Properties' yield is 5.5%. So income-focused investors will likely find Vici an attractive income stock.