$VICI · Dividendology · 2026-11-05

Although VCI Properties has rebounded after gaining nearly 10 percent in the past month, the stock is still trading near its lowest price in 5 years and at its lowest valuation in 5 years.

This is because, despite the decline in share prices, AFFO per share —the key measure of REITs' intrinsic value—has been steadily increasing and is expected to continue to do so in the future.

We see that they recently released their latest quarterly earnings report. Their dividend was also increased a few months ago. We also have some pretty exciting news that they have announced a $2 billion share buyback authorization, which is extremely rare for a stock like VCI Properties.

So, in this video, we will analyze everything in detail and use our own model to see how share buybacks will impact VCI Properties' AFFO per share growth, as well as discuss their rent coverage to verify the overall security of dividends.

if we look at the VCI for the last 5 years, it has decreased by 15.4 percent, which is certainly interesting, because as we mentioned earlier, the stock has also increased its AFFO per share every year for the last 5 years.

So finally, the price to AFFO multiple stands at just 9.73, which is quite low compared to their average of 13.7 over the last 5 years. So this affects VICI in different ways, but one thing we have to mention is that those interested in stocks like VICI Properties are obviously looking at the earnings.

VICI is currently offering a yield of around 7.5%. But investors can now get a risk-free 4.9% profit on a 10-year yield. Again, 1 year ago it was about 4.13 %. So the opportunity cost of investing in REITs has increased significantly over the past year, but that's not the only way VICI Properties is being affected.

For example, issuing shares when the stock price is much lower than it was a few years ago —especially if you think your company is trading at a lower price than it really is—is not a good way to raise capital.

And with the stock price down 17% in the past year, I think management now thinks that issuing shares is not a good way to raise capital.

On the other hand, we can look historically, if we go to our stock screener, zoom out and look at VICI. The data will load, courtesy of Ticker Data, and you will see that the number of shares outstanding has increased significantly from 2021 to 2022.

Why did this happen? We have to remember that this was a period when Treasury rates or interest rates had increased significantly, meaning that borrowing was no longer as attractive. So, they decided to start issuing shares.

But now we have a kind of two-pronged crisis. The share price is low, so issuing shares is not attractive; Treasury rates are also very high, so borrowing is not as attractive as before.

So, the natural result of this is that when we look at VICI's recent dividend growth, it's only 2.2%. Just 2.2%, which is important to keep in mind that their AFFO per share is expected to grow by about 3.3% in 2026.

Typically, you will see dividend increases in line with this. However, the recent low dividend growth means they are looking to hold onto more cash.

You see, this is a big cost of capital issue for VC Properties. And they are keeping their dividend growth rate slower than their AFFO per share growth rate to combat this. Because even though the property income is roughly the same, you could argue that it has increased slightly, the sad truth is that their cost of capital, i.e. equity versus debt, is constantly increasing, which will limit the profit margin on their investment, and that is essentially the reinvestment process.

But that's why the recent earnings report is so interesting, because REITs, which typically issue shares, announced this year that they now have the ability to buyback shares. I recently interviewed VC CEO Ed Pitoniak on the Mispride podcast, if you haven't subscribed, you should, but just a few months ago he said that it was highly unlikely that VC Properties would buy back any shares.

I wasn't surprised to hear this because share buybacks are extremely rare in REITs. However, with the share price down significantly compared to the past few years, it suddenly seems like the board and management are seeing this as an attractive opportunity. And we need to investigate what the reason is.

We see that revenue is up 7% compared to last year and they have delivered better than expected results. And VC Properties' FFO was about $0.62. Not only that, they also increased their AFFO forecast for the full year 2026.

And we see that they are now forecasting about $2.47 to $2.48 per diluted share. And the biggest news below is that a share repurchase program of up to $2 billion has been approved.

We need to monitor this closely, along with VC Properties' rental coverage.

Essentially, we want to know how fundamentally the rate will be affected by this share buyback. And we can accurately model what the ultimate outcome of this will be in terms of AFFO per share growth.

Now, keep in mind that there is no obligation for them to buy back shares. And this is something they raised in the discussion on income. They have implemented a share repurchase program of up to $2 billion.

This approval gives us flexibility. This is not a commitment to repurchase shares in any specific amount or within a specific time frame.

And before we return to this model, there is one more important point that needs to be mentioned. VICI's management raised an interesting point. Share buybacks have to compete with returns from investments elsewhere.

For example, if the stock is trading at 10 times AFFO, this indicates an AFFO yield of approximately 10%. This means that every dollar spent on buybacks or share purchases removes about 10 cents of annual AFFO before financing costs.

Now, despite that being said, management has stated that they see debt investments that exceed our AFFO yield and whether or not to increase debt becomes a strategic decision. So, share buybacks may not always be the best choice.

Now, with this in mind, let's look at some modeling of share buybacks. Usually, we need it to answer a question. After accounting for the cost of funds, how much can VICI actually increase their AFFO per share through share buybacks?

So, let's take a closer look at the matter in detail. You can see we're modeling this out to 2027 and we're assuming AFFO per share in 2027 is about $2.55. And this is based largely on the current average analyst target, which is around $2.53.

Next we have a list of existing shares and the total amount of authorized share buybacks. And this is where we need to start doing some interesting modeling. To begin, we need to specify the average share repurchase price.

Right now, VICI is trading at around $25 per share. Actually, exactly $25 per share. We then need to calculate the annual financing cost, or essentially the interest income we are losing, which will probably be between 5 and 5.5%.

I'm going towards the upper limit because I don't want to be too optimistic about this model. Now, we want to see what the full impact would be if all share buybacks were used.

So, we will raise the 2027 realized benefit to 100% and then we will assume that the stock will eventually trade at a 12 times price to AFFO multiple. And we'll see it again in a little while.

But from the beginning, what we see is this. Without any share buybacks, AFFO per share would have been approximately $2.55. But as a result of the share buyback, it rose to $2.64.

So, this is about a 3.6% increase. This may seem small, but it's a pretty big deal in the REIT world. The reality is that if the price of VICI falls further, for example, not long ago when it was trading at around $22.50 per share, then share buybacks become more effective and we can see that here.

At $22.50, this increase would be about 4.5%. This is why historically VCI has not bought back shares, but now at this low valuation, suddenly we are actually having to discuss the most effective use of their capital.

Now, another concern people have about VCI Properties is about Caesars, who are one of their largest tenants and currently account for about 37.6% of their total rent. So, this is an important tenant.

So, there is a risk of some tenant centricity here. But what we have to consider is, if their rents actually decrease, will the dividends be safe? And we modeled this too.

So, right now we see that VCI's AFFO payout ratio per share is slightly below 75%, which, remember, is their target payout ratio. Again, we saw that they increased their dividend by just 2.2%, which is lower than their estimated AFFO per share growth rate of 3.3% for the coming year.

So, it's likely we'll see a little bit more of a decline as they're retaining more cash flow to deal with their capital expenditure issues.

Now, with these words in mind, look at this sensitivity analysis. We can see that in the case of Caesars, if rents are reduced by 5%, the AFFO payout ratio will stand at 76.5%.

That reduction in rent would cause an AFFO decline of about 2.3%. If we increase it to 15%, then a 15% rent reduction would reduce AFFO per share by 7%, which would push the AFFO payout ratio to about 80.3%.

So, it will be higher than management's target, but the dividend will definitely be fairly well covered. Even with a 20% rent reduction, we see an 82.4% AFFO payout ratio. And the reality is, even if rents were to fall by 50%, AFFO per share would still be able to cover the dividend.

This would be an AFFO payout ratio of approximately 97.3%. Now, obviously, no one wants it to go that high, but it's a good practice to understand that, even though it's a significant portion of the rent and we certainly don't want the rent to go down in any way, the dividend is still protected even if there is a major reduction in rent.

So, these are the key things we need to understand about VICI right now. If we value them through the dividend discount model in our stock valuation sheet and move on to our dividend discount model.

The things we will look at, and again, as we always do quickly, is evaluating a stock by how much dividend it pays and how much that dividend will grow over time. Even if VICI increases its dividend by just 2.2% in the future, in line with their recent dividend increase, which was low because they are currently looking to retain more capital for growth, we still see a fair value of around $28.63, which would indicate a 14 to 15% increase over the current price.

If they continue to increase their dividend in line with their AFFO per share growth over the next few years, dividend growth would be close to 3%, meaning a fair value of $33 and about 32% more than the current price.

But again, I want to point out that opportunity costs with Treasury are definitely putting pressure on REITs right now. And in fact, a big reason why many REITs turned around last month is that Treasury yields fell last month.

For example, if you look at the 10-year yield, you will see that 1 month ago it was at 5.28%. So, there is a big correlation between the 10-year yield and the share price of the REITs we are looking at.

So, with all these things in mind, we need to pay close attention to what is happening in terms of share buyback approvals. Will the company increase its loan book? Is there a specific price level that would prompt them to start buying back shares?

And how much of that share buyback authorization will they actually use? At this point, it's clear that Caesars' dividend is well protected, even with a slight discount on rent.

But overall, I think it was a pretty good earnings report. VICI is a stock we will continue to monitor very closely and will likely do another interview with their CEO on the Missed Price podcast in the future.