Friday, February 5, 2010

Simon Properties ups their FFO target, but what's the common stock's piece? (SPG)

Simon Properties, a massive consumer-focused REIT with 168 malls and many other off-mall sites, traded up almost 6% today after guiding 2010 Funds from Operations (FFO) above street expectations.

Some people erroneously look at FFO as a method of calculating a Price-to-Earnings ratio for SPG. You can't do that, as there are other folks higher up the capital structure that get a piece before common stockholders get theirs.

The best way to look at this stock is the dividend yield, which based on the press release looks like 3.6%. Nice, but not even half of what some REIT's in other sectors are providing. You can get a dividend yield near this level buying Johnson & Johnson (JNJ) or UPS, with a fraction of the leverage.

From the release:
Dividends
Today the Company announced that the Board of Directors approved the declaration of a quarterly common stock dividend of $0.60 per share payable in cash. This dividend is payable on February 26, 2010 to stockholders of record on February 16, 2010.
The Company also declared dividends on its two outstanding public issues of preferred stock:
  • 6% Series I Convertible Perpetual Preferred (NYSE:SPGPrI) dividend of $0.75 per share is payable on February 26, 2010 to stockholders of record on February 16, 2010.
  • 8 3/8% Series J Cumulative Redeemable Preferred (NYSE:SPGPrJ) dividend of $1.046875 per share is payable on March 31, 2010 to stockholders of record on March 17, 2010.
SPG has done a great job managing their debt, pushing out maturities and securing a TON of liquidity with which they can be opportunistic among the real estate wreckage.

I do, however, worry that the decline in sales per square foot of their rent-paying tenants might be a precursor of dropping rents:

Copyright 2010 AlphaNinja

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