Simon Property Group (SPG) increases dividend by 6% & stands out as a premier REIT

Simon Property Group’s (NYSE:SPG) dividend was increased by a solid 6%. Its overall yield is 3.84%. The firm started paying a dividend in 1994.

Simon Property Group is the largest retail U.S. real estate investment trust, , or REITs within the United States. Is properties are primarily in premium outlets, upscale malls, and international shopping centers. The REIT owns over 200 properties worldwide. Simon Property Group is headquartered in Indianapolis, Indiana.

Simon Property Group has maintained a solid three-year growth rate of dividends of 10.9 percent. Simon Property Group currently ranks 8th in dividend yield within the large cap REIT-Retail category. The quarterly dividend for the February payment will be $1.75 versus the prior year rate of $1.65 per share. Simon Property Group is a member  of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on February 28, 2017, to shareholders of record at close of business on February 14, 2017. Simon Property Group Inc. is currently priced at $182.07. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
2/14/2017 1.75
11/14/2016 1.65
8/15/2016 1.65
5/13/2016 1.6
2/10/2016 1.6
11/12/2015 1.6
8/13/2015 1.55
5/13/2015 1.5
2/11/2015 1.4
11/12/2014 1.3
8/13/2014 1.3
5/14/2014 1.223
2/12/2014 1.176
11/13/2013 1.129
8/14/2013 1.082
5/15/2013 1.082
2/12/2013 1.082
11/14/2012 1.035
8/15/2012 0.988
5/15/2012 0.941
2/13/2012 0.894
12/14/2011 0.188
11/14/2011 0.847
8/15/2011 0.753
5/13/2011 0.753
2/10/2011 0.753
11/12/2010 0.753
8/13/2010 0.564
5/12/2010 0.564
2/11/2010 0.564


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 (3-7 year avg) 13% 158
Forward P/E 25.34 298
S&P Financial Rating A 120
Beta 0.85 100
Total Score 745

Additional Information;

% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate FFO 2016 P/FFO Ratio 10 yr P/FFO Low 10 yr P/FFO High 5 yr low Yield % 5 yr max Yield %
3.84% 10.9%  15.5% 11.60 15.70  5.60 15.95 2.19% 3.90%

Final Analysis;

Positives;

  • Simon Property Group’s dividend yield is above that of the S&P 500 Index.
  • Simon Property Group has paid out a dividend consecutively for the past 22 years.
  • Simon Property Group maintains an investment grade rating of A.
  • Simon Property Group has maintained a three-year growth rate of dividends of 10.9 percent.
  • Simon Property Group’s current dividend yield (3.84%) is at the top of its five-year average historical dividend yield.
  • Simon Property Group maintains a beta of 0.85, lower than the average company.

Negatives;

  • Simon Property Group is trading at the top of  its ten-year average price/funds from operations (P/FFO) ratio.

Latest Earnings & Overall Analysis:

Simon Property Group issued its earnings data on January 31st. 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 up a solid 9%. The REIT firm also produced nearly 4% growth in net income from 2015.  As for FFO guidance, Simon Property Group expects growth to be in the 6-7% 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 REIT firms), it produced $2.53 earnings per share for the quarter.  The REIT firm posted revenue of $1426.00 million in Q4, slightly under expectations. However, the real estate firm’s revenue was up over 3% compared to Q4 of 2016.   The REIT company maintains a $1.6B pipeline of new and redevelopment projects. In the most recent conference call, the firm’s management team indicated that the REIT maintains over 430 department stores in their portfolio of assets, and with only one vacancy. In fact, the REITs overall property base has been protected from notable store closures including Macy’s.  Only one of Macy’s closure was within the SPG mall portfolio. Its premium outlet and mall occupancy rates are at 96.8%. This was nearly 1% higher than last year. The firm 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 firm 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 has it owned nearly 300 properties throughout Europe, especially in France where the firm is based. The next year, the REIT firm acquired interests in McArthurGlen and 5 designer outlet properties in Oregon.  In 2014, the firm purchased interests in Oyster Bay and King of Prussia.

The firm has major new development projects just completed or in the works. Its new Clarksburg Premium Outlets in the D.C area had a terrific new opening in Q4 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 9 new outlets. Four of these new outlets are in overseas markets and are expected to be open in 2017.

Simon has amassed and refined a portfolio of premier class A mall and outlet properties over the last decade. Over the last six years, Simon Property group has doubled its dividend from $3.50 in 2011 to an expected payout of nearly $7 for 2017.  The firm has one of the highest credit ratings in the REIT space, at A along with solid cash flow. The company is also growing faster than most other REITs, especially among mall property companies. In examining the chart below, SPG has also maintained a high dividend yield as its increases have outpaced its share price appreciation. It five year low yield point was just over 2%, but now the REIT firm pays a dividend yield of nearly 4%, towards its all-time high level. The only negative element is its high price/FFO ratio. But in our view it is offset by the multitude of positive aspects of this real estate company.

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 Inc. qualifies as one of our Top 100 Dividend Stocks

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Simon Property Group Inc. Dividend Yield Historical Chart (Click to enlarge)

spg3

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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