Simon Property Group Inc. (SPG, Financial) is the largest retail real estate investment trust, or REIT, within the United States. Its properties are primarily in premium outlets, upscale malls and international shopping centers. The REIT owns over 200 properties worldwide. Simon has amassed and refined a portfolio of premier class A mall and outlet properties over the last decade. Over the last six years, the company has doubled its dividend from $3.50 in 2011 to an expected payout of nearly $7 for 2017.
The company has one of the highest credit ratings in the REIT space, an A. The company is also growing faster than most other REITs, especially among mall property companies. Simon has also maintained a high dividend yield as its increases in dividend payments have recently outpaced its share price appreciation. Its five-year low yield point was just over 2%, but now the REIT pays a dividend yield of nearly 4%, moving toward its all-time high level. The only negative element is its high price-free cash flow ratio. But in our view, this is offset by the multitude of positive aspects of this real estate company.
Simon Property Group's dividend was increased by a solid 6%. Its overall yield is 3.84%. The company started paying a dividend in 1994. Simon Property Group has maintained a solid three-year growth rate of dividends of 10.9%. Simon Property Group currently ranks eighth in dividend yield within the large-cap REIT-retail category. The monthly dividend for the February payment will be $1.75 versus the prior year's rate of $1.65 per share.
The dividend will be paid at the new higher rate on Feb. 28 to shareholders of record at close of business on Feb. 14. Simon Property Group is currently priced at $182.07. Listed in the table below are the monthly dividend payments since 2010.
| Date | Quarterly Dividend |
| Feb. 14 | $1.75 |
| Nov. 14, 2016 | $1.65 |
| Aug. 15, 2016 | $1.65 |
| May 13, 2016 | $1.6 |
| Feb. 10, 2016 | $1.6 |
| Nov. 12, 2015 | $1.6 |
| Aug. 13, 2015 | $1.55 |
| May 13, 2015 | $1.5 |
| Feb. 11, 2015 | $1.4 |
| Nov. 12, 2014 | $1.3 |
| Aug. 13, 2014 | $1.3 |
| May 14, 2014 | $1.223 |
| Feb. 12, 2014 | $1.176 |
| Nov. 13, 2013 | $1.129 |
| Aug. 14, 2013 | $1.082 |
| May 15, 2013 | $1.082 |
| Feb. 12, 2013 | $1.082 |
| Nov. 14, 2012 | $1.035 |
| Aug. 15, 2012 | 98 cents |
| May 15, 2012 | 94 cents |
| Feb. 13, 2012 | 89 cents |
| Dec. 14, 2011 | 19 cents |
| Nov. 14, 2011 | 85 cents |
| Aug. 15, 2011 | 75 cents |
| May 13, 2011 | 75 cents |
| Feb. 10, 2011 | 75 cents |
| Nov. 12, 2010 | 75 cents |
| Aug. 13, 2010 | 56 cents |
| May 12, 2010 | 56 cents |
| Feb. 11, 2010 | 56 cents |
Source: Annual Report
Analysis of Simon Property Group is based upon our five key criteria for the Top 100 list, which include:
| Category | Value | Score |
| Dividend Yield | 3.84% | 69 |
| Dividend Growth (three to seven-year avg.) | 13% | 158 |
| Forward P/E | 25.34 | 298 |
| S&P Financial Rating | A | 120 |
| Beta | 0.85 | 100 |
| Total Score | Ă‚ | 745 |
| % Yield | 3-year Div. growth rate | 7-year Div. growth rate | FFO 2016 | P/FFO ratio | 10-year P/FFO low | 10-year P/FFO high | 5-year low yield % | 5-year max yield % |
| 3.84% | 10.9% | 15.5% | 11.60 | 15.70 | 5.60 | 15.95 | 2.19% | 3.90% |
Latest earnings & growth update
Simon Property Group issued its earnings data on Jan. 31. The company reported fourth-quarter funds from operations (FFO) of $10.49 per share compared to $9.86 of the same quarter in 2016. For the entire 2016 calendar year, FFO per share was up a solid 9%. The REIT also produced nearly 4% growth in net income from 2015. As for FFO guidance, Simon Property Group expects growth to be in the 6% to 7% range for 2017. This amounts to $11.45 to $11.55 versus reported FFO per share of $10.49 in 2016.
As for earnings (less appropriate for REITs), it produced $2.53 earnings per share for the quarter. The REIT posted revenue of $1,426 million in the fourth quarer, slightly under expectations. However, the real estate company's revenue was up over 3% compared to fourth-quarter 2016. The REIT company maintains a $1.6 billion pipeline of new and redevelopment projects.
In the most recent conference call, the management team indicated the REIT maintains over 430 department stores in its portfolio of assets, with only one vacancy. In fact, the REIT's overall property base has been protected from notable store closures, including Macy's (M, Financial). Only one of Macy's closures was within the company's mall portfolio. Its premium outlet and mall occupancy rates are at 96.8%. This was nearly 1% higher than last year. The company has added nearly 300 quick-service restaurants, over 80 big-box tenants and 20 entertainment concepts in the past five years. Thus, Simon's growth capabilities are strong.
The company has demonstrated a great ability to gain scale through prudent acquisitions. In 2012, Simon Property Group purchased Paragon Outlets in Texas and California. The company also increased its international presence with its acquisition of Paris-based property investor Klépierre (28%). Klépierre was attractive to Simon's growth strategy as it owned nearly 300 properties throughout Europe, especially in France where the company is based. The next year, the REIT acquired interests in McArthurGlen and five designer outlet properties in Oregon. In 2014, it purchased interests in Oyster Bay and King of Prussia.
The company has major new development projects just completed or in the works. Its new Clarksburg Premium Outlets in the Washington D.C area had a terrific new opening in fourth-quarter 2016. Its Brickell City Centre in Miami also opened in the fourth quarter with favorable traffic. Construction is ongoing for several other new projects, including its Shops at Clearfork in Texas and nine new outlets. Four of these new outlets are in overseas markets and are expected to be open in 2017.
Due to its premier status among mall-based REITs, a strong dividend growth history, above-average yield, investment grade rating and low beta, Simon Property Group is a solid investment choice for any dividend investor looking for a high yield and quality growth. It qualifies as one of our Top 100 Dividend Stocks.
Disclosure: I have no position in SGP.
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