In 2015, one of the biggest casino operators in the world filed for bankruptcy…
But its story was far from over.
As part of its reorganization, it chose to take unique approach to the casino properties it owned. And that decision proved hugely profitable for the company… and for investors.
Now, normally, I like companies that have been around a while. Especially in this anything-goes market environment, I want reliable assets I can count on.
It’s the only way to truly sleep well at night.
But here’s the thing about well-established companies: It’s not a given they’ll continue being so dependable. In the same way, newer businesses aren’t always full of kinks.
You have to do your research either way, letting the facts take you where they will.
That’s what my team and I do here at Wide Moat Research: We talk to the people behind the scenes and follow the facts. And the facts have taught us that companies in must-have sectors run by knowledgeable, prudent leaders tend to boost our portfolios over time…
Today, I’ll share the story of how smart management can take a struggling business and transform it into a market-beating company. And how following smart leaders can help us find the best opportunities in the market today.
I Made a Big Bet On Las Vegas, Now It’s Paying Big Dividends
The casino operator I’m talking about is Caesars.
Even if you’ve never visited the Las Vegas “strip,” you’ve probably heard the name or seen its casino’s iconic Roman-style architecture in movies.
In 2017, Caesars Entertainment Operating emerged from bankruptcy under two companies. One to manage casino operations. And the other to manage the properties themselves.
That’s how the real estate investment trust, or REIT, VICI Properties (VICI) was born.
To head it up, the investor board chose Ed Pitoniak. Ed’s background spans private real estate, hospitality, REITs, construction, and more. And he brought that diverse experience to Caesar’s properties.
Today, VICI rents out properties to casinos and other entertainment-centric operators.
In fact, with one of the world’s largest collections of brand-name gaming, hospitality, and entertainment venues, it’s the largest landowner on the Las Vegas strip. Some of those names include:
Caesars Palace Las Vegas
And the Venetian Resort Las Vegas
These properties are impressive in pictures… but downright stunning up close and personal.
All told, VICI has 43 gaming facilities with over 122 million square feet of space featuring around 58,700 hotel rooms, and more than 450 restaurants, bars, nightclubs, and sportsbooks.
If that impressive portfolio wasn’t enough… After five short years as a publicly traded company, VICI made its S&P 500 debut earlier this year. And of the 30 REITs on that list, it’s been the best performing year-to-date.
One of the Fastest-Growing Picks on the Planet
How has it managed to do all this so quickly?
I’ve been following VICI since inception and have had the pleasure of speaking to Ed many times.
Here’s what he told me about how he sees the REIT after becoming CEO: “I quickly came to believe that this was the next great institutionalization opportunity in America for commercial real estate.”
And clearly, the concept has resonated with investors, as well. By owning shares in this REIT, they get exposure to a successful business in a growing sector… and a guaranteed dividend.
The company has grown revenues fivefold since inception. Shares are up over 5.5% year-to-date. And including the dividend, they’ve returned over 8.5%, making VICI one of the best-performing REITs we cover.
More importantly, VICI shares have returned over 13% per year – including 2020.
That’s great… But what about tomorrow? What about next year?
Considering my wise words earlier about current company track records being no guarantee of future performance, I made sure to ask Ed about it last week when I interviewed him.
You can watch a clip of that interview by clicking below:
First acknowledging that, yes, VICI has grown quite quickly… He next showed his smarts with this comment:
“At a time like this, I think a responsible management team has to be a bit sober. I think if you approach these – at least – next couple of years as a gunslinger, you could shoot yourself in the foot… The cost of credit is expensive. The willingness of potential sellers to recognize that things can’t cost as much as they used to [is also something g to consider]…”
As such, he said, he’d be “reckless” to promise the same level of growth as we’ve gotten used to seeing. Which might sound disappointing to those unfamiliar with dividend-paying stocks.
But not to me.
To my sleep well at night-attuned ears, it’s exactly what I want to hear. Because that kind of operating attitude means my money won’t be easily wasted.
Sure, the stock price might not appreciate as quickly as it has been. In fact, it might even slump depending on how the economy turns next year.
Yet VICI will retain enough cash to keep paying its shareholders attractive and growing dividends every quarter.
And that’s apparent in VICI’s latest earnings report for Q3 this year. It doubled revenue over the last year and announced an 8% dividend increase.
One of my favorite things Ed said on my call with him was, “Value creation cannot happen if you do not have value preservation.”
Knowing that Ed has investors’ wealth preservation front of mind shows me that his leadership will continue serving VICI – and its shareholders – well for years to come.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily
P.S. REITs like VICI are some of my favorite income-producing vehicles for all kinds of market weather. To get my full list of favorite REITs today, click here to learn how.