There are two things fairly certain about stock investors:
- They live in an uncertain menagerie of bulls and bears and black swans.
- Most of them chase growth.
The bulls and bears can have vociferous and persuasive debates as to why this is a time of opportunity, the dawn of a golden age or the eve of a collapse. When black swans like Covid-19 show up, the market crashes in Great Depression-fashion, only to unpredictably and astonishingly rebound within months to all-time highs.
The growth can be typified by everything from Peloton and Tesla to GameStop, until the latter collapses.
In gaming, the giddy growth story is digital—the proliferation of online sports betting, iGaming and iLottery. And more power to those who bought DraftKings at its IPO or Penn National in single digits.
Yet, in addition to high-fliers, every investor needs some stalwart holdings that will provide steady returns even when skies turn gray, and that preserve capital in preparation for the inevitable bear market.
In gaming, these safe havens are called REITs, real estate investment trusts.
Never was that better illustrated than in the Covid panic of a year ago. Stocks of the three gaming REITs fell just like all the others. Yet their tenants proved true, and continued paying their rents and strengthening their balance sheets for security. As a result, the REITs sailed by the crisis. Their stocks today are dancing at or near all-time highs.
The gaming REITs—Gaming & Leisure Properties, VICI Properties, MGM Growth Properties—recently announced fourth-quarter and full-year earnings results.
Their accompanying investor conference calls were platforms to exude confidence that bordered on serenity.
VICI CEO Ed Pitoniak noted that gaming REITs and their tenants demonstrated their strength in what probably was the greatest trial they could face. He also noted that two-thirds of triple-net lease REITs saw a decline in adjusted funds from operations last year while VICI’s per share funds from operations rose 10.8 percent.
In other words, while other REITs worry about shopping mall and office-building vacancies, the casino tenants of gaming REITs aren’t going away.
Further, VICI is marching towards achieving investment grade credit status, has consistently raised dividends in its three years and is on the hunt for acquisitions, including outside of gaming.
In addition, gaming REIT tenants are enjoying the growth of online gaming and sports betting, which will make them even stronger tenants, Pitoniak said.
Much of what could be said for VICI can be said for its fellow gaming REITS.
Gaming & Leisure Properties made clear that it too is on the hunt for acquisitions, and punctuated its bullishness days later by resuming an all-cash quarterly dividend and raising it to 65 cents a share from 60 cents. That figure accounts for the impact of a 9.2 million share issuance and eight million shares paid out last year as part of the cash-stock mixed dividend.
Based on current share price, that puts Gaming & Leisure’s dividend at around a 6 percent yield. MGM Growth Properties is near 6 percent and VICI’s is approaching 5 percent.
Their strength and returns are attracting attention. MGM Growth Properties CEO James Stewart noted increasing interest by institutional investors, including Blackstone’s $150 million investment in his company.
And while nothing is certain, including how high interest rates will go and the impact that will have, the gaming REITs right now look attractive for those seeking some stability in their portfolios.
