Simon Property Group Stock: 6.8%-Yielder Raises Guidance & Dividend Again
November 3, 2022
SPG Stock Is a Top High-Yield Dividend Stock to Watch
When it comes to rebounding from the COVID-19 pandemic, no real estate investment trust (REIT) did it better than Simon Property Group Inc (NYSE:SPG). In 2019, the REIT posted industry-leading record financial results, including revenue ($5.8 billion), cash flow ($4.0 billion), and funds from operations (FFO) ($4.4 billion). It also paid $8.30 per share in cash dividends that year.
Suffice it to say, even industry giants like Simon Property Group suffered during the COVID-19 pandemic. Because of quarantine orders and the forced closing of many businesses in 2020, Simon Property’s revenue fell by $1.2 billion, cash flow declined by $1.5 billion, and FFO slid by $1.2 billion. (Source: “Simon 2021 Annual Report,” Simon Property Group Inc, last accessed November 1, 2022.)
But because of the company’s well-located real estate portfolio and its top-tier tenants, the company bounced back in 2021 with significant occupancy gains and record retailer sales. In 2021, its revenue increased by more than $500.0 million to $5.1 billion, its cash flow increased by $1.3 billion to $3.9 billion, and its FFO climbed by $1.2 billion to $4.5 billion. This allowed management to increase Simon Property Group stock’s quarterly dividend by 27%.
The total return from SPG stock in 2021, including dividends, was more than 95%, which outperformed the S&P 500.
That momentum carried into 2022 with strong quarterly results, increased guidance, and three quarterly dividend hikes (so far). Despite the company’s solid achievements this year, investors haven’t rewarded Simon Property Group stock with a rise in value. While SPG stock is up by 21% month-over-month, it’s still down by 30% year-to-date and 24% year-over-year.
Despite ongoing macroeconomic headwinds, fears of a global recession, and geopolitical tensions, Wall Street remains bullish on Simon Property Group stock. Analysts have a 12-month share-price target for Simon Property Group Inc in the range of $119.45 to $141.00, which points to potential gains of approximately 17% to 33%.
Chart courtesy of StockCharts.com
About Simon Property Group Inc
Simon Property Group is a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations. The company’s worldwide footprint comprises about 400 retail centers in 24 countries. (Source: “Why Simon?” Simon Property Group Inc, last accessed November 1, 2022.)
The REIT’s global properties are anchored by more than 3,000 retail powerhouse tenants, including “Apple Store,” “Giorgio Armani,” “Gucci,” and “Hugo Boss.” (Source: “Iconic Properties Infinite Opportunities,” Simon Property Group Inc, last accessed November 1, 2022.)
In addition to retail, the company’s growing property portfolio includes offices and hotel/residential properties.
Meanwhile, the Simon Media Network boasts more than 7,700 digital and static media assets that provide access to billions of consumer impressions every week in major designated markets.
The REIT has two new international projects nearing completion. The Fukaya-Hanazono Premium Outlets project in Tokyo, Japan is expected to open in October. Simon Property Group Inc owns a 40% interest in this project. The Paris-Giverny Designer Outlet project in Normandy, France is projected to open in the first quarter of 2023. Simon Property Group owns a 74% interest in that project.
Moreover, progress continues in the mixed-use redevelopment of Phipps Plaza in Atlanta, GA. The plaza and 13-story Class A office tower is expected to open this fall. Construction also continues on other redevelopment projects, including The Falls (Miami, FL), Northgate Station (Seattle, WA), Roosevelt Field (Garden City, NY), Stanford Shopping Center (Palo Alto, CA), and Towne East Square (Wichita, KS).
Management Raises 2022 Guidance & Quarterly Dividend
For the second quarter ended June 30, Simon reported net income of $496.7 million, or $1.51 per share, compared to $617.3 million, or $1.88 per share, in the second quarter of 2021. (Source: “Simon Reports Second Quarter 2022 Results and Increases Full Year 2022 Guidance and Raises Quarterly Dividend,” Simon Property Group Inc, August 1, 2022.)
The company’s results in the 2022 second quarter included a non-cash unrealized loss of $17.8 million, or $0.05 per diluted share, from a mark-to-market in fair value of equity instruments. The same prior-year period included a non-cash gain of $118.4 million, or $0.32 per diluted share, from the reversal of a deferred tax liability within an international investment.
Simon Property Group Inc’s FFO in the second quarter was $1.1 billion, or $2.91 per diluted share, compared to $1.2 billion, or $3.24 per diluted share, in the prior year’s second quarter. Its comparable FFO in the second quarter of 2022 was $1.11 billion, or $2.96 per diluted share, compared to $1.098 million, or $2.92 per diluted share, in the prior year period.
During the second quarter, the company repurchased 1.4 million common shares of SPG stock.
The REIT’s year-to-date net income was $923.4 million, or $2.81 per diluted share, compared to $1.1 billion, or $3.24 per diluted share, in the same period of 2021.
Simon Property Group Inc’s year-to-date 2022 FFO was $2.1 billion, or $5.61 per diluted share, compared to $2.15 billion, or $5.72 per diluted share, in the same period of the prior year. Its year-to-date comparable FFO grew by 6.3% year-over-year from $2.0 billion, or $5.40 per diluted share, to $2.2 billion, or $5.74 per diluted share.
“We are very pleased with our financial and operational performance in the second quarter and once again raised our quarterly dividend and full-year 2022 guidance,” said David Simon, Simon Property Group Inc’s chairman, CEO, and president.
For full-year 2022, management expects to report net income in the range of $5.93 to $6.00 and comparable FFO in the range of $11.70 to $11.77.
On November 1, the REIT announced a dividend of $1.80 per share, for a high yield of 6.2%. That’s up from $1.65 in the same quarter of 2021 and $1.75 in the previous quarter of 2022. Simon Property Group has raised its dividend in six of the last seven quarters. (Source: “Dividend History,” Simon Property Group Inc, last accessed October 26, 2022.)
The Lowdown on Simon Property Group Stock
Simon Property Group Inc is the largest mall REIT, managing one of the top retail property portfolios in the U.S. and internationally. It’s the No. 1 choice for retail brands, and because of its top-tier tenants, its retail centers are popular with high-income earners and international tourists.
The REIT continues to report solid financial results, it has been steadily increasing its high-yield dividends, and it has once again raised its full-year guidance.
