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Simon Property: A Rough Year for a Blue Chip REIT

07/13/2020 5:00 am EST

Focus: REITS

Kelley Wright

Managing Editor, Investment Quality Trends

We often like to remind blue chip stock investors that you need to have at minimum a five-year time horizon for investing in stocks. Longer is better, asserts Kelley Wright, dividend expert and editor of Investment Quality Trends.

How long the present uncertainties persist is anyone’s guess. Accordingly, there is a struggle taking place in the stock market. The actions by the Federal Reserve is bullish for stocks, and the coronavirus is bearish for stocks.

What I want to address is Simon Property Group (SPG), the worse performer to date from our "Lucky 13", a group of stocks recommended at the end of last year.

Simon closed all properties in the U.S. on March 18. Since the beginning of May, Simon has opened 199 of its 204 U.S. retail properties and the remaining five are scheduled to re-open shortly.

Additionally, 30 of Simon’s Designer and international Premium Outlets properties are open, including all its international Premium Outlets in Asia as well as Designer Outlets in Continental Europe. The company also recently announced the inauguration of Siam Premium Outlets Bangkok.

SPG also just recently announced a 38% dividend decrease, but that it will pay out a minimum of $6 per share for 2020. The company has sufficient cash to maintain the original dividend, but I think they did the prudent thing for the long-term benefit of the company given their current cash flow.

Prior to the pandemic they did enter into an agreement to buy another company, which they still may have to do. They have the cash if necessary, and long-term the acquisition can still be a net positive.

The economic book value for SPG is $92.26 per share, a significant premium from the current share price. I thought SPG was a great company in December and I still do.

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