Simon Property Groups (NYSE:SPG), which has distributed cash dividends since 1994, is a solid regional mall REIT, having not missed a quarter in terms of dividends and sporting the biggest year-over-year bump in that sector. In 2014, Harvard Business Review named chairman and CEO David Simon among the top five best-performing CEOs in the World. There are, however, some imperfections in SPG’s stock.
SPG itself has been a star. With $57 billion in equity capitalization, it is the biggest REIT we follow and remains among the fastest-growing. Total revenue increased 14 percent during Q2 2015, compared to the same period in the prior year. Simon deploys massive capital expenditures for promoting property developments and redevelopments and also expands its footprint by partnering with several parties, the most recent such example being with Sears Holdings Corporation. The company owns a share of the recently-launched Seritage Growth Properties (NYSE:SRG).
Quarterly dividends for SPG bumped up three times in a row this year. Last July, they increased the Q3 dividend by $0.05 to $1.55, raising them 19 percent year-over-year. At other times, however, they decreased dividends, as during the Great Recession, when they cut their dividend by a third and distributed stock dividends. To give proper credit, many REITs decreased or even halted dividend distributions from 2009 to 2010.
All we can say is that there is a price for size, strength and robustness. While SPG is now trading at a 20× FFO-to-price ratio — in line with the sector median — dividend yields are below that level (3.6 vs. 3.2 percent).
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Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.