CEO Steve Tanger - of the eponymous outlet company - famously said, “In good times, people love a bargain, in bad times folks need a bargain.”
While the dominant narrative seems to be that malls in the US are going the way of the dodo, outlet and discount malls seem to be doing just fine.
On August 14 I bought 10 shares of Simon Property Group (SPG) for a total of $1,585.80.
With the stock in steady decline for the past year (see picture below), I believe it has entered bargain territory.
In this post I explain the reasons why I made these additions to my portfolio and what this means for my forward dividend income.
Simon Property Group is an equity real estate investment trust. The firm invests in the real estate markets across the globe. It engages in investment, ownership, management, and development of properties.
It primarily invests in regional malls, premium outlets, mills, and community/lifestyle centers to create its portfolio.
Simon Property Group, Inc. was founded in 1960 and is based in Indianapolis, Indiana, with additional office in New York, New York.
SPG’s current dividend yield is 4.70% – higher than the average 3.5% yield I strive for in building my portfolio.
The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - boasting an 8 year streak of growing dividend pay-outs.
The 5 year dividend growth is an impressive 11.38% - with last year’s dividend growth coming in at 9%.
SPG‘s Earnings per Share (EPS) over the last five years shows an 11.02% increase. Projected EPS growth for next year as compared to the current year is 11.15%.
The trailing 12 months Price/Earnings (P/E) is 27.22, which is well below the 5 year average of 32.42. It is also significantly lower than the industry’s 5 year average of 67.13.
In their August 22 report CFRA marks SPG as a 3 star hold with a 12 month target price of $170 - about 9% above my buying price.
EVA Dimensions (another equity research firm) states in their August 23 report that SPG’s Performance Risk Valuation score is at the 80th percentile of all firms in its industry, which leads to a recommendation to Buy.
It adds that SPG is more attractively priced in relation to its true value than all but a few of the stocks in its industry.
Given SPG’s annual dividend of $7.20 per share this purchase increased my forward annual dividend income by $72.
I’m not the biggest fan of mall based companies at the moment, especially given the state of many of the malls in the area around me. How do you feel about SPG’s property portfolio? I know the trend is moving away from brick and mortar malls. Has the company been working through this trend? I’m just curious, I haven’t looked in this company because it is an area I just have preferred to stay away from.
Looking forward to hearing about it!
Bert
Bert,
Agree that malls in general are under pressure in the US – the ‘Amazon’ effect, millennials not driving to big box stores etc. I do think outlet malls are a different category though. Shoppers (per the quote of Tanger at the beginning of my article) tend to love bargains (and the process of bargain hunting). While traditional mall retailers have been suffering (Sears, Macy’s etc) discounters like Ross and TJX have been doing quite well over the past 5 years.
I agree that outlet malls are not isolated from larger mall trends in the US, but at the current price I believe SPG is oversold. We’ll see!
Some relevant analysis: https://seekingalpha.com/article/4101687-retail-reit-matchup-tanger-vs-simon-buy-one
Thanks for stopping by!
SPG is certainly the strongest of retail REITs. It is also the largest, larger market cap than all the others combined. Well diversified worldwide and in tenants.
It only gets a small portion of its income from outlets, maybe 9-10% if memory serves.
I looked at this and Tanger Outlets last week. If I had to buy just one, it would be SPG. I actually wrote an article about these two on seeking alpha.
Best of success in your investment!
Justin,
Thanks for providing additional insight. And please share your Seeking Alpha articles when you have a chance.
Here is the link: https://seekingalpha.com/article/4101687-retail-reit-matchup-tanger-vs-simon-buy-one