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Shares of Simon Property Group SPG gained 4.92% during Monday’s regular trading hours after management announced a 7.7% hike in its second-quarter 2021 dividend. The company will now pay $1.40 per share compared with the $1.30 paid earlier.
The increased dividend will be paid on Jul 23, to shareholders on record as of Jul 2, 2021. The latest dividend rate marks an annualized amount of $5.60 per share versus the prior rate of $5.20 per share. Based on the company’s share price of $131.50 on Jun 21, it results in a dividend yield of 4.26%.
Solid dividend payouts are the biggest enticement for REIT investors, and Simon Property is committed to boosting shareholder wealth. Last year, while a number of REITs suspended dividend payments in light of the pandemic that disrupted the macro economy and affected rent collections, Simon Property continued with its dividend payment, though at a reduced rate, paying a dividend of $1.30 instead of the prior payment of $2.10. Now, the latest hike brings additional relief for investors and reaffirms confidence in this retail landlord.
Markedly, retail REITs, which have already been battling store closures and bankruptcy issues, are battling pandemic-induced challenges with e-commerce adoption increasing manifolds, and social-distancing requirements affecting customer traffic and rental collections from tenants. In fact, apart from Simon Property, this turbulence has affected other retail REITs, including Macerich MAC, Regency Centers REG and Kimco KIM among others.
Nevertheless, with the resumption of the economy and improving leasing environment, Simon Property is poised to benefit from its superior assets in premium locations. In fact, the vaccination roll-out and the additional fiscal stimulus support consumer sentiment, and the company will likely see growth in both earnings and cash flow this year.
Shopper foot traffic and sales across Simon Property’s portfolio got a boost amid an improving domestic economic environment and shopper confidence. Also, management raised the 2021 funds from operations (FFO) per share guidance to $9.70-$9.80, up from the $9.50-$9.75 guided earlier. This suggests an increase of 13 cents per share at the mid-point. In addition, collection from its U.S. retail portfolio continues to improve. The company collected more than 95% of its net billed rents for the first quarter.
Restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments, adoption of an omni-channel strategy and its successful tie-ups with premium retailers augur well for the company’s long-term growth. Additionally, Simon Property is exploring the mixed-use development option, which has gained immense popularity in recent years, as well as capitalizing on buying recognized retail brands in bankruptcy.
Moreover, the REIT is steadily making concerted efforts to bolster its financial flexibility. This enabled the company to exit first-quarter 2021 with more than $8.4 billion of liquidity.
Its total secured debt to total assets was 24%, while the fixed-charge coverage ratio was 4.0 as of Mar 31, 2021, higher than the required level. Moreover, the company enjoys a corporate investment-grade credit rating of A from Standard and Poor's and a senior unsecured rating of A3 from Moody’s. With solid balance-sheet strength and available capital resources, it is well poised to navigate through the pandemic blues, bank on the opportunities generating from market turbulences and boost shareholder wealth.
Shares of this Zacks Rank #3 (Hold) company have gained 54.2% so far in the year compared with the industry’s rally of 23.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
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