Peter Lynch was a phenomenal investor. He delivered an astounding 29.2% average annual return in the mutual fund he managed. One of the keys to his success was adding to his highest-conviction ideas. Lynch famously said: “The best stock to buy is the one you already own.”
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With that pearl of wisdom in mind, two great stocks to add to right now (or add to your portfolio if you don’t already own them) are American Tower (NYSE: AMT) and VICI Properties (NYSE: VICI). Here’s why adding $500 or so to those positions would be a wise move right now.
An attractive entry point
American Tower is currently facing some stiff headwinds. The data-infrastructure REIT is battling higher interest rates, foreign exchange fluctuations, and tenant issues. These problems have put pressure on its shares, which are currently down more than 30% from their 52-week high.
That sell-off has driven the REIT’s dividend yield up over 3%, currently around its all-time high. A $500 investment could generate more than $15 in annual dividend income at that rate.
American Tower offers an attractive dividend yield for a company with a long history of growing its payout at an above-average pace. It has increased its dividend at a more than 20% compound annual rate since becoming a REIT over a decade ago. While growth has slowed more recently, the company expects to boost its payout by another 10% in 2023.
Meanwhile, the company expects its current headwinds to fade and give way to much stronger long-term tailwinds. It sees multiple catalysts powering robust growth in the coming years. Mobile carriers will need a lot more capacity to support 5G networks, which will benefit its U.S. tower portfolio.
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Likewise, catalysts such as business transformation and AI will drive demand for its data center platform. And American Tower can continue expanding its international-tower footprint and eventually take its data center platform global.
With the share price down, dividend yield up, and a growth reacceleration ahead, now looks like a great time to add to American Tower.
A very low-risk gamble
VICI Properties is coming off a transformational year. The experiential REIT acquired fellow gambling REIT MGM Growth Properties in a $17.2 billion deal last year. It also invested in several other gambling and non-gambling properties.
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These investments are powering market-crushing growth. They’re also fueling market-beating total returns (VICI Properties was the only REIT that delivered a positive return in 2022 when the market was down sharply).
Shares have cooled off a bit in recent months. VICI currently sits about 7% below its 52-week high. That’s despite having lots of momentum to continue growing briskly this year.
Meanwhile, the REIT has lots of growth ahead. Chief operating officer John Payne discussed VICI’s potential on its first-quarter conference call, saying, “We are laying the groundwork for VICI’s next phase of expansion domestically and globally across gaming and many other experiential sectors.”
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Payne said that the company recently made its first international transaction, buying four casino properties in Canada. “This transaction will be the first of many international investments that the VICI team continues to explore across the globe,” he said.
In addition to growing its gambling portfolio in the U.S. and abroad, Payne said: “The team is intensely studying sectors we believe fit well with our VICI Properties investment criteria. We continue to meet and build relationships with owners and operators in many sectors, including health and wellness, youth, collegiate and professional sports, various forms of family entertainment, theme parks, holiday parks, and other destination-based experiences.”
Future deals will grow VICI’s rental income, allowing it to continue increasing its attractive dividend. That payout currently yields 4.7% following the recent slide in the share price. At that rate, a $500 investment could produce almost $25 of annual dividend income. The REIT has increased it in all five years since its formation.
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Attractive entry points
Shares of American Tower and VICI Properties are down from their 52-week highs. Because of that, they offer higher dividend yields right now to go along with their strong long-term growth prospects. That income and growth potential at a lower valuation makes them look like brilliant stocks to add a few hundred dollars to these days.
