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Bear of the Day: Simon Property Group (SPG)

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Simon Property Group (SPG - Free Report) is the $22 billion real estate investment trust (REIT) engaged in acquiring, owning and leasing of shopping, dining, entertainment and mixed-use destinations. The company’s real estate portfolio consists of malls, premium outlets, "mills" and various international properties.

As of June 30, 2020, Simon Property owned or held interests in 204 properties in the United States. This comprises 99 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers and 18 other retail properties across 37 states and Puerto Rico.

My colleague Dave Borun profiled SPG as the Bear of the Day in July where he wrote...

The performance of Real Estate Investment Trusts has been a mixed bag lately. On one hand, public companies that own rental properties and are required by law to pay out 90% of their pre-tax income to shareholders have been providing yields that are much more attractive than the rates that can be earned in money-market savings accounts or fixed-income instruments like Treasury bonds.

In normal conditions, REITs tend to trade more like bonds, with prices that rise as interest rates fall.

On the other hand, there’s a very real possibility that REITs that invest in the commercial markets will see widespread tenant lease defaults. As consumers continue to shift their shopping habits to include more online purchases and fewer trips to the mall, an increasing number of large brick-and-mortar retailers have filed for bankruptcy protection.

At the beginning of 2020 when SPG shares were trading near $145/share, the company’s portfolio of 204 properties allowed them to pay a regular dividend of between 3-5% - a very solid yield. At the more recent share level of around $64/share, the dividend yield is now north of 8% annually.

(end of Dave Borun's excellent summary of the SPG business situation)

Since Borun's report, analyst revenue and profit estimates have continued to slide for SPG with this year's top line expected to fall nearly 17% vs 2019 to under $4.8 billion.

And in the past 90 days, EPS estimates have dropped another 8% for 2020 from $10.56 to $9.72, representing an annual decline of over 19%. Thus SPG remains in the cellar of the Zacks Rank.

Where Does a Real Estate or Income Investor Turn?

Investors looking for safe and steady income from REITs have had to reevaluate their strategy this year. But all is not lost in real estate because the home builders have some of the best investment profiles right now with the highest Zacks ratings.

For more on what could be an amazing decade for housing, see my recent Zacks Confidential report where I explain my thesis on what is about to unfold...

Demographics and Economics: A Strong Case for the Roaring 20s Bull Market

In that report, I use a lot of analysis from my favorite real estate expert, Tracey Ryniec. Her research helped convince me that the housing boom of 2020 could extend for the next 3 to 8 years.

If you want to get a copy, just email and tell 'em Cooker sent you. Until then, check out the interview I did with veteran private wealth manager Chad Willardson of Pacific Capital where he and I discuss how to navigate almost any market storm with a long-term plan that can easily beat the averages.

Chad's new book Stress Free Money: Overcome These Seven Obstacles to Find Financial Freedom is a short and handy guide to getting your "money game" tuned-up and ready to prosper in this exciting and fertile new decade. And we go over several of the important principles in my Mind Over Money podcast and article...

Stress-Free Wealth Creation with Chad Willardson

The article version of our podcast discussion (in that same link) has a snapshot of my core thesis about how to avoid shooting yourself in the foot with too many frequent decisions about your retirement nest egg.

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