REIT stocks of several stripes rallied on Monday, including an IBD 50 stock to watch, as the market hustled to value in the economic impact from what appeared to be rising prospects of a coronavirus vaccine.
Shopping mall real estate investment trust Simon Properties (SPG) bolted higher by more than 8%. Office space and commercial space REIT Vornado Trust (VNO) swung up more than 4%. Of the two REIT stocks on the IBD 50 list, medical marijuana grow facility owner Innovative Industrial Properties (IIPR) slipped 0.3%.
Vici Properties (VICI), which owns and manages casino, golf and other gaming/hospitality-related properties — and which has one of the more clever names and tickers on the stock market — jumped almost 4% in opening trade, then eased to a less than 1% advance in afternoon trading. In the process, the REIT stock briefly conquered what IBD MarketSmith chart analysis plots as a cup base and a buy point at 26.15. Share pulled back narrowly below the entry, but did not trigger any caution flags, so the breakout remained in play.
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REIT Stocks: Comparing Vici’s Debt Ratio
Raymond James had initiated coverage of the stock on Thursday, assigning it a buy rating and a 32 price target. During this year’s pandemic, Vici had posted the best rent collections across the net lease sector. New York-based Vici delivered its third-quarter earnings report on Oct. 28, delivering a 23% earnings gain and a 53% top-line increase to $340 million.
The third quarter also included closings on three properties: Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin. Rent revenue was increased at two Las Vegas properties, Caesars Palace and Harrah’s Las Vegas. The company provided a $400 million mortgage on the Caesars Forum Convention Center.
Vici also began moving beyond gaming properties, with its $80 million financing of Chelsea Piers in New York – a 780,000-square-foot sports and recreation facility on the Hudson River in Manhattan’s Chelsea neighborhood.
The company’s outstanding debt at the end of the quarter was $6.9 billion, at an average interest rate of 4.8%. That is a hefty debt service load. Still, Vici’s debt-to-equity ratio comes in at 60%. That is about half of Vornado’s ratio, and a fraction of Simon Property Group’s.
The quarterly report sent Vici shares up more than 3% in the following session, marking a turning point in the base from which the stock broke out on Monday.
Vici Strengths And Weaknesses
Property REIT stocks in general had lagged the market in 2019. IBD’s Finance – Property REIT industry group gained 24% for the year, vs. a gain of better than 35% for the Nasdaq. However, Vici Properties outpaced the group with a 36% rally in 2019, acting more like a tech stock than a real estate play. This year, its shares have just turned positive year-to-date, up a fraction of 1% on Monday.
But the picture is a little sweeter for income investors, who look primarily to Vici’s 5.1% dividend. Income investors know that REITS are similar to master limited partnerships, gaining tax advantages by paying out the bulk of their free cash flow in the form of dividend distributions to shareholders.
Vici stock’s base formed mostly above support at its 10-week moving average, a bullish trait. Vici carries a modest IBD Relative Strength Rating of 76, a weakness not unusual among stocks that found themselves on the wrong side of the coronavirus economy.
However, Vici’s relative strength line is creeping to its highest level since June, a clear positive that shows the stock outperforming the S&P 500. Its Accumulation/Distribution Rating has improved to a C+, an indication that institutional shareholders are neither adding to nor exiting positions in the stock.
REIT stocks in general have rallied on hints of vaccines or other glints of hope during the coronavirus pandemic. Vici remained nearly 10% below its February high on Monday.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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