![]() The real estate investment is well-managed, provides international diversification, and is experiencing rapid growth in net operating income. ( NYSE: NYSE: SPG) currently trades at a double-digit funds from operations yield of 11%. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*ĭavid and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Simon Property Group wasn't one of them! That's right - they think these 10 stocks are even better buys.Simon Property Group Inc. When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. A full recovery, however, will take years, not months, so investors may have to wait a while for the stock to regain its past glory.ġ0 stocks we like better than Simon Property Group That said, Simon seems safe from a future dividend cut, thanks to ample liquidity, and may even have some room for a dividend hike sometime soon. And that's reflective of Simon's stock that's yet to regain its pre-COVID-19 price along with management's less than ambitious FFO guidance for next year. Applying a 69% payout ratio to the midpoint of Simon's guided FFO per share gives an annual dividend of $6.63, which works out to be a 5.5% dividend yield.ĭespite the reflation trade (basically a big recovery bet) being the flavor of the month and investors focus on companies that should rebound fastest, from a real word perspective it'll take time for people to feel comfortable going back to malls and flush enough to start spending on discretionary goods. In 2019, Simon paid 69% of its FFO in dividends, so investors should probably be expecting a dividend hike more than a dividend cut. That said, at current levels, the dividend payout ratio (basically the dividend as a percentage of funds from operations) is 54%, which is low for a REIT in general. What about the dividend? Well, Simon was forced to cut its dividend from $2.10 per share to $1.30 per share, which is painful for any income investor. At the end of 2020, the company had $8.2 billion in liquidity between cash on hand and borrowing capacity. Despite the lousy year in 2020, the company generated $3.2 billion in funds from operations, which more than amply covers its interest expense of $616 million. It is the premier operator of shopping malls in the United States, and it is in a strong financial position. How safe is Simon Property? Simon is pretty safe. Still, the company is quite safe and the dividend is well covered Often retailers are permitted to break their leases if a department store is vacant. Department stores are still having a rough time, and they are the anchor tenants for shopping malls. Finding new tenants to replace bankrupt ones will take time, and that might explain why the company is guiding for such low growth. Simon's occupancy rate fell from 95.1% at the end of 2019 to 91.3% at the end of 2020. Given the size of the earnings drop-off in 2020, investors might have expected more than 5.6% growth, but it looks like the recovery will take a few years. ![]() For the full year 2021, Simon is guiding for FFO per share to rise to between $9.50 and $9.75. This is because property depreciation is such a big expense, and it is a non-cash charge. Earnings per share were just about cut in half, however FFO is the preferred method of looking at a REIT's earnings. ![]() Don't expect to see a rapid bounce-back in resultsįor the full year 2020, Simon reported funds from operations (FFO) per share of $9.11, which was a decline of 24% compared to 2019. Simon also purchased some of its distressed tenants, including Forever 21, J.C. Simon tried to get out of the deal, and ended up going forward at a reduced price. Simon Property Group entered the COVID-19 crisis with numerous challenges, including having just negotiated a deal to buy competitor Taubman Centers.
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