This Stock Pays Me Nearly 8% a Year, and I Can't Stop Buying It

Vici Properties (VICI) is a dividend stock that has captured my attention for more than six years. Despite its recent price decline, the stock now offers a yield close to its historical peak, making it an attractive option for income-focused investors. Vici is a real estate investment trust (REIT) that owns and manages 103 properties, primarily gaming-related facilities on the Las Vegas Strip, including famous casinos like Caesars Palace, MGM Grand, and The Venetian.

These properties are leased over long-term agreements, typically lasting 50 years or more, with rent increases tied to inflation. This creates a stable and growing income stream for investors.

Vici has been consistently increasing its dividend for eight straight years, demonstrating a commitment to returning value to shareholders. Although a 7.7% yield appears high, it remains well-covered by the company's funds from operations (FFO), with Vici projecting to pay about 75% of its FFO as dividends this year. This payout ratio is considered comfortable for a REIT and indicates a strong ability to sustain its dividend growth.

The performance of Vici's underlying business is robust. Its casino tenants continue to pay rent, and there are no signs of distress among these tenants. Moreover, Vici has successfully implemented strategies to invest its capital effectively, even in a challenging growth environment for real estate businesses. The driving force behind Vici's stock price decline is the rise in interest rates.

With the 10-year Treasury yield exceeding 5%, income investors have more attractive alternatives, and higher interest rates make borrowing more expensive for REITs, which can negatively impact stock prices. However, these factors do not change my long-term outlook on VICI. A lower stock price allows me to purchase more shares at a higher yield, and as long as Vici's yield remains elevated due to its falling stock price, I am committed to adding shares and growing my income stream.