Simon Property Group: Not Expensive For Management


Simon Property Group (NYSE: SPG) — the REIT that owns Premium Outlets — has raised its dividends once again this year, and expects to distribute a record of $6 per share within the year. Year-over-year dividend growth has thus far reached 19 percent, and dividend yield is 3.2 percent — not bad for a supersize $58 billion market cap regional mall REIT.

During Q2 2015, FFO-per-share reached $2.63, including a $0.22 gain through securities sales, resulting in a net figure of $2.41 and giving us a 14 percent year-over-year growth. Same-property net operating income has increased 3.6 percent — lower than its own recent figures and Macerich’s (NYSE: MAC) Q2 figure.

Management, taking advantage of a volatile REIT stock market, has repurchased shares, lowering the number of outstanding shares and units — a signal that they see no big deals on the horizon. They have focused on development or redevelopment of properties. Pursuing this strategy, Simon Property has partnered with Sears to redevelop their stores — a possible sign, too, that they will not pursue another offer to Macerich.

This share buyback is also interesting in that it gives us an interior bird’s-eye view of where management stands on share prices. We may think the stock is trading on the lower side of the dividend yield (3.2 vs. the peer median of 3.6 percent) and on the high side of price-to-FFO (19.1x vs. peer median 15x); according to management, however, it looks cheap when high dividend growth in the future is embedded.

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Source: Simon Property Group, Fast Graphs

Written by Heli Brecailo

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.​