The Indianapolis-based company owns, develops and manages real estate properties such as malls, outlet centers, office space, hotel and residential buildings in 37 U.S. states and Puerto Rico. It also has outlet centers across Asia, Europe and North America.
One area where Simon really shines is its outsize dividend. Real estate investment trusts pay out the majority of their taxable income to shareholders as cash dividends. In November, the REIT declared a quarterly cash dividend of $1.65 for Q4. That marked a 26.9% year-over-year increase and was 10% higher than the Q3 dividend.
On an annualized basis, that works out to $6.60, for a 4% yield. The average payout for the S&P 500, by comparison, is 1.26%.
IBD Stock Checkup assigns Simon a 90 Composite Rating, which gives investors a quick way to gauge a stock’s key growth traits. That puts it among the leaders in the 179-stock property REIT group, which includes Extra Space Storage (EXR), Public Storage (PSA) and Weyerhauser (WY).
Stocks To Watch: Growth Back On Track
A 78 Earnings Per Share Rating, part of the overall composite score, reflects a five-year earnings growth rate of -6%. After a slowdown in 2019 and sharp drop in 2020, analysts expect growth to resume for 2021. After six straight quarters of declines, Simon’s funds from operations (FFO) rose 53% in both Q2 and Q3.
“Demand for our space from a broad spectrum of tenants is growing,” Chairman, CEO and President David Simon said in a Q3 statement. “Occupancy gains continued, retailer sales accelerated, including our owned brands, and cash flow increased.”
FactSet analysts forecast a 32% year-over-year jump in FFO in Q4, followed by a 12% increase in Q1. For the full 2021, they expect 28% growth to $11.68 a share.
The coronavirus pandemic has taken a toll on mall operators, as stores shut down and shoppers stayed away. Even though most stores have since reopened and some traffic has resumed, the rapidly spreading omicron variant could affect retailers — and REITs — again.
Sales growth came in at 18% in Q2 and 22% in Q3, after five quarters of declines. A 40% return on equity more than meets the 17% ideal minimum for leading growth stocks. These contribute to an A SMR Rating (sales, profit margins, return on equity), which puts Simon in the top 20% of all stocks based on those metrics.
On the technical side, a 96 Relative Strength Rating means the REIT is in the top 4% of all stocks. Its relative strength line, which tracks a stock’s performance vs. the S&P 500, has turned upward and is close to record highs. A move to a new high at or ahead of a potential breakout would be a bullish sign.
Time To Shop Soon?
SPG stock is getting close to a 165.93 buy point of a cup with handle, according to MarketSmith chart analysis. It’s about 2% away from the entry. The stock has had a nice run from its March 2020 lows, so the current base is third stage, which increases the risk of a failed breakout.
Note that most stocks make their biggest advance out of earlier-stage bases. Also, keep an eye on the broader market. With the market uptrend under pressure, all stock purchases are riskier than during a confirmed uptrend. Read The Big Picture daily to stay on top of current market trends.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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