Simon Property Group (SPG) is giant mall operator and REIT, which was one of the worse possible businesses to be in during a global pandemic, notes Kelley Wright, dividend investing expert and editor of Investment Quality Trends.
This REIT owns, develops, manages, leases, and acquires primarily regional malls and community shopping centers. It is one of the largest owners of shopping centers in the world.
SPG either owns or has an interest in 235 properties comprising 191 million square feet consisting of 99 malls, 69 outlets, 14 mills, four lifestyle centers and four other properties spread over 37 states and Puerto Rico as of the end of Q2 2020.
Internationally it has ownership interest in outlets in Asia, Mexico, Europe, and Canada totaling 31 properties. SPG also has a 22.4% equity stake in Klepierre SA, a publicly traded, Paris-based company that has interest in shopping centers in 15 countries in Europe.
In February 2020, SPG announced that it had entered into a definitive agreement to acquire 80% ownership interest in Taubman (TCO). In November 2020, SPG announced it had reached an agreement with TCO to modify the original merger agreement, which will lower the acquisition cost by approximately $800 million.
SPG has the best balance sheet compared to peers at 8.6 times debt-to-recurring EBITDA compared to the peer average of 21.2 times as of the end of Q2 2020. SPG paid Q2 dividends of $1.30 per share, in cash, a 38% cut from the previous quarterly dividend of $2.10.
SPG expects to pay at least $6.00 per share in cash dividends for 2020, subject to the board approval. The current quarterly dividend rate of $1.30 per share should be sustainable as it represents a 70% FFO payout ratio.
Yes, the dividend was reduced, which was necessary for the long-term benefit of the company and its shareholders. With vaccines being delivered and the hope of herd immunity developing, this could be a huge positive going forward.
