Is VICI Properties Undervalued Amid a Challenging REIT Market?

In a year marked by headwinds for the broader REIT sector, VICI Properties (VICI) has emerged as a compelling anomaly. With a current dividend yield of 6.47%, inflation-linked leases, and a ~48.4% discount to intrinsic value per DCF models, the company appears poised to outperform its peers. This analysis examines VICI's financial resilience, its unique positioning in experiential real estate, and why its undervaluation may present a rare opportunity for income-focused investors.

Discounted Cash Flow Analysis: A 49% Undervaluation Case

Discounted cash flow (DCF) models suggest VICI is significantly undervalued. According to AlphaSpread, the company's intrinsic value is estimated at $38.28 per share, compared to its current market price of $27.81-a 27% discount. However, deeper analysis from 247WallSt and Simply Wall St reveals a broader ~48.4% undervaluation relative to fair value. This discrepancy arises from conservative assumptions in DCF models, which fail to fully account for VICI's inflation-linked leases and disciplined capital allocation.

The company's triple-net lease model, where tenants like Caesars and Live! Casino cover property taxes, insurance, and maintenance, ensures stable cash flows. These leases also include contractual escalators tied to inflation, a critical feature in today's macroeconomic environment. As Simply Wall St notes, this structure "supports long-term dividend growth potential," making VICI's cash flows less susceptible to economic volatility than those of traditional REITs.

Income Stability: AFFO Growth and Operational Efficiency

VICI's income stability is underscored by robust cash flow metrics. For fiscal 2024, the company reported $3.8 billion in revenue and $2.4 billion in adjusted funds from operations (AFFO), a 8.4% year-over-year increase. In Q3 2025, AFFO per share rose 5.3% year-over-year to $0.60, and the company revised its 2025 guidance to $2.50–$2.52 billion in AFFO, or $2.35–$2.37 per share. This growth, coupled with a 4.4% projected year-over-year increase in 2025, highlights VICI's operational efficiency.

Notably, even as net income dipped in Q4 2024, AFFO grew by 5.4% year-over-year to $601.3 million. This resilience stems from VICI's focus on high-occupancy properties and strategic cost management, which insulate it from broader REIT sector challenges like office vacancy and apartment supply gluts.

Dividend Growth Track Record: A 4.13% CAGR

VICI has raised its dividend for eight consecutive years, with a compound annual growth rate (CAGR) of 4.13%. Its current 6.47% yield is well-covered by earnings, with a payout ratio of ~75%, providing a buffer against economic downturns. This track record is rare in a sector where many REITs have cut or suspended dividends in 2025 due to rising interest costs and asset devaluation.

The company's inflation-linked leases further bolster its dividend sustainability. For example, its gaming properties in Las Vegas and Atlantic City are leased under long-term agreements with annual rent escalators averaging 2–3%. These provisions ensure that cash flows-and by extension, dividends-keep pace with inflation, a critical advantage in a 2025 environment where fixed-income alternatives like 10-year Treasuries yield ~4.1%.

Contrasting with the Broader REIT Sector

While VICI thrives, the broader REIT sector has faced turbulence. The FTSE Nareit All Equity REITs Index returned just 2.3% in 2025, dragged down by weak office REITs and oversupplied multifamily markets. J.P. Morgan Research notes that REIT valuations are "stretched," with dividend yields failing to justify the risk/reward profile compared to safer assets.

VICI's focus on experiential real estate-gaming, entertainment, and mixed-use developments-positions it differently. Unlike traditional REITs, which face asset depreciation and tenant turnover, VICI's properties benefit from recurring revenue streams tied to discretionary spending. Its recent expansion into experiential assets, such as the $1.7 billion acquisition of the Hard Rock Hotel & Casino in Hollywood, further diversifies its revenue base.

Risks and Considerations

No investment is without risk. VICI's tenant concentration-Caesars alone accounts for ~30% of its revenue-and potential lease renegotiations could pose challenges. Additionally, rising interest rates may pressure its debt costs, though its long-term, fixed-rate debt structure mitigates this risk.

Conclusion: A Buy for Income and Growth

VICI Properties' combination of a 6.5% yield, inflation-linked cash flows, and ~49% undervaluation per DCF models makes it a standout in a struggling REIT sector. While broader market risks persist, the company's disciplined capital allocation, resilient AFFO growth, and strategic expansion into experiential real estate position it for long-term outperformance. For investors seeking income stability and capital appreciation, VICI represents a compelling case for immediate consideration.