Forget Caesars, MGM, Consider This Las Vegas Strip Stock
Las Vegas offers the promise of getting rich. In most cases this is a false promise as the house usually wins, but you can win money in Sin City without rolling dice, playing cards or playing slots. Las Vegas has a surprising number of investment options, and the best might be a company you’ve never heard of (or maybe you never realized was public).
Everyone knows the big casino operators. You can buy stock in Las Vegas Strip leaders Caesars Entertainment (CZR) – Get the report from Caesars Entertainment Inc.MGM Resorts International (MGM) – Get the MGM Resorts International Reportand Wynn Resorts (WYNN) – Get Wynn Resorts, Limited Report. Many people do this by exposing themselves not just to the Strip, but to all sorts of regional properties operated by Caesars and MGM. Wynn, of course, has interests in Macau and all three companies are global players.
On the Strip, however, a corporation actually owns the underlying real estate where Caesars and MGM actually only manage the properties. Running a casino or a hotel involves risks. What happens if people don’t come, play as much as expected, or spend less on shows, meals, and everything else?
As owner, VICI Properties (VICI) – Get the VICI Properties Inc report collects his rents, no matter how crowded the casinos and hotels he owns. It’s quite an attractive business, and VICI has become the largest owner of hotels and convention space in the United States.
It also just joined the S&P 500, joining Caesars, MGM, Wynn, Las Vegas Sands (LVS) – Get the Las Vegas Sands Corp report.and Penn National Gaming (PENN) – Get the report from Penn National Gaming, Inc. as Vegas leaders being part of the S&P 500.
VICI dominates the Las Vegas Strip
VICI bought the Venetian and its associated exhibition and convention center in 2021. This was followed by its $17.2 billion buyout of MGM Growth Properties, which closed in late April.
These two agreements make the Real Estate Investment Trust (REIT) a major player on the Strip, even if its name does not appear on any marquee.
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“VICI not only added 15 Las Vegas and regional casinos with the MGP agreement, but it added nearly 41,000 hotel rooms and 1.2 million square feet of gaming space, making it the largest casino owner on the Strip,” reported Casino.org.
VICI now owns the real estate assets of Caesars Palace, Harrah’s, Excalibur, Luxor, Mandalay Bay, MGM Grand, Mirage, New York New York and Park MGM, as well as various regional casinos operated by MGM and Caesars.
Why is VICI a good investment?
REITs have predictable earnings and must distribute at least 90% of their profits to shareholders in the form of dividends. TheStreet explained why REITs are a good investment in an article published in May 2022.
Due to their consistently high dividends, REITs are a popular investment vehicle for investors who seek the passive income associated with owning real estate, but don’t have the time or money to buy , maintain and rent a property of their own. They are also popular during times of higher than usual inflation, as rent and real estate prices tend to rise along with consumer goods, sometimes resulting in more money for shareholders. REITs at a time when traditional stocks may falter.
As we are in a period of higher inflation, VICI presents itself as a safe play for now, it is also a good long-term investment. VICI CEO Ed Pitoniak shared some very positive news about the company’s business model during his call for first quarter results.
“Over the past two years, COVID-19 has proven the resilience of VICI’s business model because COVID has proven the resilience of our tenants’ business models. VICI has collected 100% of our rent in cash and on time throughout of the COVID-19 crisis due to the operational excellence and operational liquidity of our tenants. Our operators have shown their ability to operate against all odds,” he explained.
If VICI has managed to collect all of its rents during a pandemic – a rare feat for any large landlord during covid – it is a safe haven, a dividend-paying investment worth considering during the current market uncertainty ( and after).