Is VICI Properties (VICI) a Dividend Dynamo for Passive Income?

Introduction
The search for reliable dividend stocks to fuel long-term passive income often leads investors to REITs (Real Estate Investment Trusts), which are legally required to distribute at least 90% of taxable income to shareholders. VICI Properties Inc. (NYSE: VICI), a REIT specializing in experiential real estate, has carved out a niche by owning iconic gaming, hospitality, and entertainment properties. But is VICI truly the best dividend stock for passive income? Let’s dissect its dividend history, financial health, and risks to find out.

1. Dividend Reliability: Growth, Yield, and Sustainability

VICI’s dividend track record is a key selling point. Over the past five years, it has increased its quarterly payout every year, with a 6.86% annualized growth rate in 2024. For instance, its dividend rose from $0.415 to $0.4325 per share in late 2024—a 4.2% increase—and now stands at an annualized $1.73 per share. This translates to a 5.75% dividend yield as of Q1 2025, well above the 10-year Treasury yield and competitive with peers like National Retail Properties (NNN) (5.43%) and National Health Investors (NHI) (5.02%).

But dividends must be sustainable. VICI’s payout ratio—the percentage of earnings paid out as dividends—was 67.58% in Q1 2025, up slightly from prior quarters but still below the 70% threshold many analysts consider a warning sign. This compares favorably to the Real Estate sector’s average payout ratio of 141.7%, meaning VICI retains more earnings for reinvestment or debt reduction. The company’s AFFO (Adjusted Funds from Operations) of $0.58 per share in Q1 2025 comfortably covers its dividend, providing a 1.34x coverage ratio.

2. Financial Strength: Portfolio Diversity and Revenue Drivers

VICI’s financial performance is underpinned by its 93 experiential assets, including 54 gaming properties like Caesars Palace and MGM Grand, plus 39 other entertainment venues. This portfolio generates stable cash flows through long-term, triple-net leases with top-tier operators, shielding it from short-term volatility.

Q1 2025 projections show $985.6 million in revenue, a 3.6% year-over-year increase, driven by:
- Sales-type leases: Up 1.9% sequentially to $530 million.
- Lease financing receivables: Rising 0.9% to $425 million.
- Strategic growth areas: Its 33 acres of undeveloped land near the Las Vegas Strip and partnerships with brands like Canyon Ranch and Great Wolf Resorts position it for future expansion.

The company also maintains a conservative balance sheet: a debt-to-equity ratio of 0.63 (well below the sector’s 0.85 average) and an investment-grade credit rating (Baa3) from Moody’s. This financial flexibility allows it to navigate rising interest rates, though high interest expenses remain a near-term headwind.

3. Risks to Consider

No investment is without risks. VICI’s key challenges include:
- Interest Rate Sensitivity: While its debt is manageable, $14.5 billion in total liabilities could pressure net income if borrowing costs rise further.
- Economic Cyclicality: Its gaming and hospitality assets are vulnerable to recessions or reduced consumer spending.
- Dividend Lagging Peers: Despite its strong payout ratio, its 5.75% yield trails the sector’s 6.34% average—a gap that could widen if AFFO growth slows.

4. Peer Comparison: How VICI Stacks Up

Metric	VICI	NNN (National Retail)	NHI (Healthcare)	Sector Avg
Dividend Yield	5.75%	5.43%	5.02%	6.34%
Payout Ratio	67.58%	84.3%	79.1%	141.7%
5-Year Dividend Growth	7.76%	3.2%	5.1%	N/A

VICI’s lower payout ratio and higher dividend growth give it an edge over peers like NNN and NHI, even if its yield is slightly lower. Its focus on high-margin experiential assets—which often command premium lease rates—also differentiates it in a sector dominated by traditional retail or healthcare REITs.

Conclusion: VICI’s Case for Long-Term Passive Income

VICI Properties emerges as a compelling dividend stock for passive income investors, but it’s not without trade-offs:
- Pros:
- Sustainable Dividend: A 5.75% yield with a 67.58% payout ratio is comfortably covered by AFFO.
- Resilient Portfolio: Gaming and entertainment assets have historically outperformed during economic upturns.
- Growth Catalysts: Untapped land, strategic partnerships, and rising experiential demand could boost AFFO.

• Cons:
• Yield Lag: Trails the sector average, though this may reflect its conservative payout strategy.
• Debt Exposure: Rising interest costs could pressure margins in a higher-rate environment.

For income-focused investors willing to overlook the yield gap, VICI’s track record of dividend growth, diversified cash flows, and below-average payout ratio make it a top-tier candidate for long-term portfolios. However, those seeking maximum yield may prefer peers with higher payout ratios, even if they’re riskier.

In the end, VICI isn’t just another dividend stock—it’s a disciplined operator in a high-demand sector, making it one of the best bets for passive income seekers who prioritize stability and growth over short-term yield spikes.