VICI is undervalued; fair value ~$28.63 implies ~26% upside based on 2.2% earnings growth, though risks include tenant concentration and higher refinancing costs.

The first stock is VICI Properties, a stock that many investors are beginning to feel impatient about. They are extremely dissatisfied with the returns they have seen, particularly during the past year.

The share price of the Real Estate Investment Trust (REIT) has fallen by 29.5% , giving it a record initial dividend yield of around 8.2%. To put this in perspective, the average yield over the past few years has been closer to the 5-6% range.

Therefore, an 8% return is unreasonable compared to the average we have seen over the past five years .

If we look at VICI, listed here, yes, we can see the poor performance of the stock price over the past year; But over the past three, five, and seven years, adjusted operating cash flow per share has grown at a very strong rate , and this growth is expected to continue at a strong rate in the future.

In fact, if we take a closer look at this on ticker.com, you can see the adjusted operating money projections per share over the next few years. Growth is expected to continue in the 2-3-4% range for the most part.

Remember that dividends for real estate investment trusts are paid from adjusted operating funds. Therefore, ultimately, they need to generate adjusted cash flows from operations (AFFO) per share that exceed dividends per share , which is something VICI has done well over the past few years.

Their target dividend payout ratio is approximately 70-75%, and they have fully adhered to it. So, what does the growth in adjusted cash flows from operations ( AFFO) per share in a real estate investment trust ( REIT) mean to us at the same time as the share price continues to fall?

Well, this means that the rating multiplier has decreased significantly, and the rating has become more attractive.

In fact, the average five- year rating multiple is about 13.8. Now, their shares are trading at just 9.05, their lowest level in the past five years. It is now important to determine precisely why this happened in order to assess whether this is an opportunity or just a sharp decline.

One of the common theories I observe among pessimists about VICI Properties is that they are quick to point to problems in Las Vegas.

Las Vegas experienced a relatively significant decrease in visitor traffic in 2025, but we also note that tourist numbers have stabilized so far in 2026. Growth in 2026 has been almost constant in terms of total visitor numbers and hotel occupancy , but at the same time, we note a slight increase in gambling revenue and a slight increase in the number of hotel rooms.

Overall, the figures remained very close to the 2025 levels.

We often refer to VICI Properties' business model, as it is a real estate investment trust. The company is not directly affected by the decrease in the number of visitors; all that matters to it is the continued collection of rents.

We need a significant and prolonged decrease in visitor traffic in Las Vegas for VICI to be tangibly affected. However, there is certainly still a risk to tenants, and this is where we should discuss the matter more broadly.

While it is true that their occupancy rate is 100%, which is quite remarkable, the 100% net triple leases mean that tenants bear a large portion of the costs, creating highly predictable cash flows for VICI.

However , we note that their largest tenants alone account for approximately 70% of their total rental income. This is where investors' concerns begin, and here's why: Caesars is currently seeking a deal to go private.

MGM had a similar deal, but it appears to have been pulled for the time being.

However , Caesars remains the largest single investment in their portfolio, representing 38% of total rental income. The problem is that if the company goes private, investors will suddenly lose the ability to see rent coverage ratios.

Ultimately, the valuation multipliers are determined based on two factors: first, the expected growth rate of future cash flows, and second, the predictability of these cash flows.

Therefore, if we lose clarity on rent coverage for this type of tenant, who represents 38% of cash flows, it is natural that investors would be willing to pay a lower valuation multiple.

Furthermore, we note that the recent increase in VICI Properties' dividend payout was significantly lower than historical averages, amounting to only 2.2%. While a 2.2% dividend growth rate is relatively strong for a real estate investment trust (REIT) that generates an 8.2% return, this is not a historically high dividend growth rate .

What is the reason? Ultimately, it can be summarized in three possible options. First, the adjusted operating cash flow forecast for the stock will be revised downwards. Currently, growth remains strong, at least according to forecasts.

Secondly, this could mean reducing the targeted dividend payout ratio to adjusted operating cash flows . We will return to this topic shortly, but the third point is that management expects adjusted per-share operating cash flow growth to slow after 2026, and determines dividend growth based on its long-term outlook, not just this year’s outlook.

It is worth noting that the forecast for this year indicates an adjusted operating cash flow per share of approximately 3.3%. Now , what is the reason for that? Okay, once again, we need to understand how Treasury bond prices affect the real estate investment trust (REIT) market in general.

Let's look at the balance sheet of VICI Properties. It is an investment-grade budget. They are within the target leverage ratio, but one of the things we notice is that they have a tiered debt structure . 99% of their debt is fixed-interest, which is a positive thing when interest rates rise.

But they will have to start refinancing these debts, and they will likely do so at higher interest rates because interest rates continue to rise. This will slow the growth of adjusted per- share operating cash flow after 2026 because interest expenses will continue to rise.

Now, once again, the other possibility is that they will lower their target of adjusted operating cash flows (AFFO ). Why do they do that? Okay, once again, it's very important to remember this.

Keep this in mind as well when looking at the other REITs in this video , as REITs can ultimately grow in two different ways. The first is to continue borrowing, but they clearly do not want to become over- indebted.

Borrowing becomes less attractive when interest rates rise, as they are now.

The second option is issuing shares. As you can see, this is common. It's not necessarily as bad as most people think. It depends on the return on investment they receive from the capital raised from the share issuance.

But at the moment, VICI is facing a difficult situation. Why? Well, once again , the cost of borrowing has risen significantly. At the same time, the cost of issuing shares also increased.

Why is this? Well, because the stock price fell by about 30% last year.

So, what is their solution to this problem? Well, one solution is to retain a larger portion of their cash flow to fund growth. To do this, they will have to reduce their Target Amount to Payout (AFFO ), which ultimately means not increasing dividends at the same historical rate.

Therefore, it is essential to understand the broader environment in which Real Estate Investment Trusts (REITs) operate in order to understand the decisions they are currently making.

But with all of the above, here's what's interesting about real estate investment trusts. If we turn to the equity valuation sheet , available on tickerdata.com (link in description), and then enter the VICI code, and look at it from the perspective of the dividend discount model , we will find that the fund’s current performance is surprising.

Clearly, the targeted dividend payout ratio is within the specified range, as the adjusted operating cash flow (AFFO) per share easily covers dividend payments. Adjusted net operating cash flow per share is expected to grow by about 3.3% over the next year within this range.

But if we look at the discounted earnings model, and assume earnings growth of only 1% permanently, we will find that the stock is already undervalued . With profits growing by 2%, there is potential for a 22% increase.

With profits growing by 3%, the potential for an increase of up to 45% compared to current prices.

So, I repeat, I don't want to be overly optimistic . The most recent increase in earnings was only 2.2%, and if this rate continues, the fair value would be around $28.63, which means a potential increase of approximately 26% compared to current prices.

Unless we see major problems with large tenants, I think the intensive selling is overdone.

Therefore, the solution VICI Properties resorted to was to increase dividend payouts by a smaller percentage to maintain a larger cash flow.