Dividend stocks play a pivotal role in many investment strategies, offering reliable income streams alongside opportunities for capital growth. With a plethora of options available, identifying the most promising dividend stocks is crucial for optimizing returns. Today, we feature three standout stocks—VICI Properties, American Tower, and Royal Bank of Canada—that analysts have rated as Strong Buys. Let’s delve deeper to uncover which of these stocks deserves your top investment consideration.
First up is VICI Properties (VICI), a real estate investment trust (REIT) that focuses on acquiring and owning properties within the gaming, hospitality, and entertainment sectors. Since its inception in 2017, VICI has quickly risen to prominence as one of the leading REITs in the gaming industry, boasting a market capitalization exceeding $35 billion. The company has strategically built a portfolio of captivating assets in Las Vegas and other major U.S. markets, including renowned names such as Caesars Palace, MGM Grand, and Mandalay Bay. VICI generates the majority of its earnings through single-tenant, triple-net leases, highlighting the stability of its income.
Over the past year, VICI’s stock has appreciated by 8%, with a particularly robust performance since July, where it has surged approximately 10%. This impressive upward trend can largely be attributed to encouraging financial results—Q2 saw revenue climb 6.6% year-over-year, reaching $957 million. A significant factor contributing to this growth is the increasing consumer preference for experiences over material goods, underpinning VICI’s mission to “Invest in the experience.”
In response to its strong performance, VICI recently increased its quarterly dividend by 4.2% to $0.4325 per share, leading to an attractive forward dividend yield of 5.15%. From a valuation standpoint, VICI’s forward price-to-AFFO (Adjusted Funds From Operations) ratio stands at 15.1x, which is below the sector average of 16.8x and below its own seven-year average of 16.2x.
Turning our attention to American Tower Corporation (AMT), this company is a pivotal player in the wireless communications infrastructure landscape. Established in 1995, American Tower has become one of the largest REITs in the telecommunications sector, with a vast portfolio that includes over 224,000 communication sites across 25 countries. These assets, which encompass cell towers, rooftop antennas, and small cell networks, are leased to leading wireless carriers and broadcasters, ensuring a steady and predictable revenue stream through long-term lease agreements.
American Tower has demonstrated robust financial performance, achieving total property revenue growth of 6.9% year-over-year on a foreign exchange-neutral basis. Its impressive EBITDA margin of 62.5% surpasses the REIT sector median of 53.6%. The company is actively expanding its global footprint, particularly in high-growth regions such as Africa and Europe, while also diversifying its business into data centers following its strategic CoreSite acquisition.
Although American Tower offers a forward dividend yield of 2.67%, the stock is well-positioned in terms of coverage, with a payout ratio of 61% based on projected 2024 AFFO. However, its forward P/AFFO ratio of 22.8x is higher than the sector average, indicating that it may not present an immediate value buy. Nevertheless, with strong fundamentals and an expanding presence in the AI-driven data center market, American Tower remains a compelling option.
Lastly, we have the Royal Bank of Canada (RY), the country’s largest financial institution, which boasts a rich history dating back to 1864. RBС operates a diversified business model, encompassing personal and commercial banking, wealth management, and capital markets. The institution has earned a reputation for stability and growth, ranking as the tenth-largest investment bank globally by fees.
RBC recently reported a 7% increase in net income year-over-year, showcasing the resilience of its business model, even as it navigates challenges like rising provisions for credit losses. Growth in its residential mortgage segment was noteworthy, achieving a robust 10.2% increase. The bank’s net interest income benefits from the current high-interest-rate environment, with the Personal & Commercial Banking segment witnessing a 15% uptick.
With a forward dividend yield of 3.4%, RBC’s dividends are well-supported by its earnings. The stock trades at 13.8x forward earnings, which reflects a premium compared to its sector peers. However, its high forward price-to-earnings-to-growth (PEG) ratio of 2.06 denotes a significant premium that may limit upside potential.
In summary, while each of these stocks offers unique strengths, careful consideration suggests that VICI Properties stands out due to its focus on gaming and entertainment, benefiting from the current consumer shift towards valuing experiences over material goods. Its impressive financial performance and attractive valuation metrics further underscore its investment appeal.
For savvy investors, keeping a close eye on these dividend stocks may lead to opportunities for consistent income and potential growth, crucially enhancing their portfolios in today’s dynamic market landscape.