Simon Property Group Inc.
) reported impressive third quarter results late last month, which
included a raised FFO guidance for the full year that sent earnings
estimates higher. With a year-to-date return of 16.7% and a
dividend yield of 3.0%, this retail REIT (real estate investment
trust) promises to be a solid pick for investors seeking both
growth and income. Earnings for this Zacks #2 Rank (Buy) are
presently expected to grow 13.8% in 2012 and 6.7% in 2013.
Strong Third Quarter
On October 25, Simon Property Group reported a jump of 14.3% in
third-quarter revenues to $1.2 billion. Comparable sales in the
regional malls and premium outlet centers increased 9.3% to $562
per square foot. Average rent per square foot in the combined
portfolio increased 3.8% during the quarter to $40.33.
FFO came in at $1.99 per share, surpassing the Zacks Consensus
Estimate by 7 cents or 3.7%. This also compared favorably with
year-ago FFO of $1.71 per share. Occupancy in the combined
portfolio remained relatively high at 94.6%.
With solid quarterly results, Simon Property Group increased its
FFO guidance for 2012 to between $7.80 and $7.85 per share from its
earlier projection of $7.60 - $7.70.
The past 30 days have seen a number of upward revisions for 2012
and 2013. The Zacks Consensus Estimate for this year is up 1.2% to
$7.84 per share as 12 of 17 estimates moved higher. For 2013, the
Zacks Consensus Estimate is $8.37, which is up nearly 1% in 30 days
as half of the 18 estimates moved upward.
Simon Property Group paid a dividend of $1.10 per share in the
third quarter of 2012, which marked a 22.2% increase over the
year-ago quarter. The current dividend payment affirms a yield of
Simon Property Group's valuation metrics are at a premium on a
price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares are
currently trading at a forward P/E of 18.74x versus the peer group
average of 18.21x. On a P/S basis, shares are trading at 9.66x
versus 7.49x for the peer group average. A healthy earnings growth
prospect warrants the premium valuation of the company.
Since April 21, 2011, Simon Property shares have consistently
outperformed the S&P 500 index. The year-to-date return for the
stock is noteworthy at 16.7% compared to an S&P 500 tally of
With a favorable supply/demand relationship, rising earnings
estimates, robust growth projections and a healthy dividend yield,
Simon Property offers an enticing upside potential going forward.
In addition, a continued focus on some of the premium markets in
major metropolitan areas bode well for its long-term growth.
Headquartered in Indianapolis, Indiana, Simon Property is the
largest publicly traded retail real estate company in North
America, engaged in acquiring, owning and leasing a diverse
portfolio of shopping malls. The company currently owns or has
ownership interests in 333 properties spanning 242 million square
feet of gross leaseable space in North America, Europe, and Asia.
The company presently has a market cap of $45.5 billion.
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