Gaming and Leisure Properties: A Contrarian Bet on High-Yield REIT Value

In the shadow of the S&P 500's lofty 21.5x P/E ratio, gaming and leisure REITs trade at a compelling discount. As of August 2025, the sector averages a 16x P/FFO multiple, while Gaming and Leisure Properties (GLPI) commands a P/FFO of just 13.3 and a P/AFFO of 11.8. These metrics, coupled with a 6.46% dividend yield, position GLPI as a contrarian gem in a sector often overlooked by mainstream investors.

The Case for GLPI: Dividend Growth and Accretive Acquisitions

GLPI's second-quarter 2025 results underscore its value proposition. Revenue rose 3.8% year-over-year to $394.9 million, with AFFO climbing 4.4% to $276.1 million. The company's dividend, now $0.78 per share quarterly, reflects a 2.63% increase from the prior quarter, pushing the annualized yield to $3.12. While the payout ratio remains high (91.57% of FFO), GLPI's disciplined capital structure—bolstered by recent $600 million and $700 million senior note issuances—ensures liquidity for its aggressive acquisition strategy.

The company's asset acquisitions are particularly compelling. In 2025, GLPI funded $150 million for Ameristar Casino Council Bluffs at a 7.10% cap rate and $130 million for the Hollywood Casino Joliet relocation at 7.75%. These projects, alongside a $110 million delayed draw term loan for the Acorn Ridge Casino, demonstrate GLPI's ability to secure high-yielding assets in regional markets. Such accretive deals not only enhance cash flow but also diversify the portfolio, reducing reliance on Las Vegas-centric properties.

Contrarian Value in a Resilient Sector

The gaming REIT sector, with a 5.7% average yield, lags behind GLPI's 6.46% offering. Yet, GLPI's valuation appears disconnected from its fundamentals. At a 13.3 P/FFO, it trades below the sector average of 16x, suggesting undervaluation. This disconnect may stem from market skepticism about REITs in a high-interest-rate environment. However, GLPI's triple-net lease structure—where tenants like Boyd Gaming and Caesars cover operating expenses—insulates it from rising costs, making it a defensive play.

Moreover, GLPI's geographic diversification across 20 states, including emerging markets like Brooklyn and the Bronx, positions it to capitalize on the $329 billion U.S. gaming industry's expansion. The company's recent lease extensions with Boyd Gaming and Bally's, along with its 35-acre Las Vegas land parcel adjacent to the Athletic's stadium, highlight its strategic foresight. These moves not only secure long-term cash flows but also align with the growing demand for integrated entertainment hubs.

Risks and Rewards

Critics may cite GLPI's 100%+ payout ratio as a red flag. However, REITs are designed to distribute most of their earnings, and GLPI's AFFO growth (up 5.2% in Q1 2025) suggests the dividend is sustainable. The company's $13.6 billion market cap and 7.7 REITRating™ score further validate its operational efficiency and tenant stability.

That said, investors must monitor tenant credit risk. GLPI's top four tenants account for 46% of its properties and 61% of gross asset value. A downgrade in a major tenant's credit rating could ripple through its portfolio. Yet, with Caesars, Penn, and Boyd Gaming maintaining strong balance sheets, this risk remains manageable.

Investment Thesis

For contrarian investors, GLPI offers a rare combination of high yield, disciplined growth, and sector undervaluation. Its 6.46% yield, coupled with a P/FFO of 13.3, presents a compelling entry point for income-focused portfolios. The company's accretive acquisitions and strategic tenant partnerships further reinforce its long-term value.

Action Plan:
1. Buy for yield: GLPI's 6.46% dividend, supported by AFFO growth, makes it a top-tier income play.
2. Monitor capital allocation: Track the $375 million in development funding and new lease extensions for signs of continued value creation.
3. Watch tenant health: Keep an eye on credit ratings of Boyd Gaming and Caesars, which anchor GLPI's portfolio.

In a market that often overreacts to macroeconomic noise, GLPI's fundamentals scream for attention. For those willing to look beyond the headlines, this high-yield REIT offers a rare blend of income and growth in a sector poised for resilience.