![]() Some of the locations will likely be exposed to the downturn. There is considerable exposure to areas that are likely to outperform as indicated by that A- rating. It has a well-diversified geographic location for net income. Simon Property Group clearly is the largest operator in the United States. Simon Property Group Net Operating Income Diversification Pie Charts (Simon Property Group First Quarter 2023, Earnings Supplemental Release) Market will take the hint that this leading sector performer is likely to continue that outperformance. ![]() That debt rating should tell the market that there are no debt repayment concerns. Clearly the location of the company's properties plays a role in that decision. The latest dividend raise, while cautious, indicates some optimism about the future performance of the company. Even now, the stock price action indicates a worry about consumer spending that would likely impact future results.īut clearly, management has another opinion because the dividend has been raised steadily ever since that initial cut. Obviously, the coronavirus challenges played a part in that dividend cut as did a number of other reasons. Before the start of the chart shown above, management had cut the dividend back from a quarterly rate of $2.10 last paid in fiscal year 2020. The dividend is "on a roll," with the amount having been significantly raised. Simon Property Group Recent Dividend History (Simon Property Group Website May 6, 2023) Debt covenants are in great shape and the company regularly has access to some of the best borrowing terms in the industry. So, the total debt/equity ratio shown above is not a concern. Simon has a debt rating of A-, which is one of the highest rates in the sector. It is a similar story for the debt ratio. Similarly, the company's unusual profitability ratio also shows up in a high price to book value ratio. Big margins often show up in valuations as high price to sales ratio. The price to sales ratio is going to be high because this company is unusually profitable. Simon Property Group Valuation Ratings By Seeking Alpha Website (Seeking Alpha Website May 6, 2023)Ī lot of traditional measures like price-earnings ratio and dividend yield are getting historically high. As a result of business improving, the valuation numbers shown above have been getting cheaper.īut that rut is below the valuation where Simon Property Group stock typically trades. ![]() Most would agree that the stock price has been stuck in a "rut" for some time based upon the history shown above. Simon Property Group Common Stock Price History And Key Valuation Measures (Seeking Alpha Website May 6, 2023) But you would not know that from the latest price action. As a result, the company often outperforms competitors in a downturn. The diversification of the company is unmatched by most competitors. Simon Property Group is one of the largest operators of its kind in the United States. But when quality issues offer the same returns (in the near future) along with a possibility of the first returns, then oftentimes it not worth the risk to speculate on the greater returns of riskier issues because the possibility of "winning" or coming out with a better risk-adjusted return is a lesser possibility. It can happen the other way around as well. ![]() A combination of imperfect information combined with a rush to quality (at any cost) can cause this. In fact, sometimes, the quality issues rally first and by far the most, with the speculative issues left behind. Therefore, for a little while, risk-taking is really not rewarded. But sooner or later, quality is usually a winning argument.īecause the market generally gets rid of everything at one point during a downturn, the quality issues often have the same immediate recovery potential at first as the more aggressive or speculative issues. In any downturn, the market decides what it does not like and usually proceeds to throw out everything in the category. This is going to make for a very interesting situation if it continues. ( NYSE: SPG), which I previously covered here, is heading north. While the stock price heads down, the dividend of the common stock of real estate investment trust ("REIT") Simon Property Group, Inc. (Note: This article is in the newsletter as of May 6, 2023.)
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