SPG - Simon Property Group: Still Undervalued With Well-Covered Dividend

2024-06-07 10:03:31 ET

Summary

• Simon Property Group (SPG) has outperformed the Real Estate sector and the S&P 500, providing a total return of nearly 50% since October 2023.
• SPG's diverse property offerings and expansion efforts contribute to its strong financials and liquidity.
• The current dividend yield of 5.2% and current FFO per share covers the dividend by a massive 178%.
• Based on my dividend discount model, I estimate a fair value that has a 14% upside from the current levels even when using a conservative outlook.
• Future interest rate cuts can serve as a strong catalyst for price upside as it gets more affordable to access debt that can help fuel developments and expansion.

Overview

With interest rates remaining at their decade highs, the Real Estate sector ( XLRE ) has been beaten up over the last two year period. However, there were still some strong REITs within the sector that provided high total returns. Simon Property Group ( SPG ) is one of these well-performing REITs that has managed to remain an outlier during these challenging macro-economic conditions. I previously covered SPG back in October of 2023 with my article titled: ' Malls Are Not Dead '. Since then, SPG has provided a total return of nearly 50% while simultaneously outperforming the S&P 500 ( SPY )....

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