Investors now have one more item and trend to worry about in the stock market: how lower interest rates set by the Federal Reserve (the Fed) might affect the future growth prospects for different companies, especially those that rely on steady cash flows to pay out dividends. Historically, lower rates mean lower earnings and dividends for the financial sector, but just the opposite can be said about the real estate sector.
Simon Property Group TodaySPGSimon Property Group$169.02 +1.31 (+0.78%) (As of 09/30/2024 ET)52-Week Range$102.11▼$170.87Dividend Yield4.85%P/E Ratio21.53Price Target$162.78
Not all housing stocks are made equal, though, as the trend of fundamental data definitely shows investors should stay away and even consider selling the homebuilding industry, particularly names like KB Home NYSE: KBH and Toll Brothers Inc. NYSE: TOL today. However, there are equally important reasons for investors to watch an income-generating real estate investment trust (REIT) like Simon Property Group Inc. NYSE: SPG as lower interest rates work their way through the market.Get Simon Property Group alerts:Sign Up
Since this REIT portfolio holds mall and shopping center properties, investors can be safe in knowing that Simon’s tenants will likely keep vacancy rates at historic lows and also afford higher rental rates set by Simon to keep up with inflation. This is a stable income play in real estate and a growth thesis growing out of the consumer discretionary sector.
What’s Been Happening With Simon Property Group Stock Lately?
Markets remain bullish on this REIT stock, a fact that investors can check for themselves by looking at the chart alone. A new 52-week high would suggest markets have a preference for this name over the broader S&P 500 index, as the market has seen increased volatility lately.
More than that, the company reported a positive quarterly earnings result, further building a potential bullish case for the coming quarters. The bottom line jump to $1.51 earnings per share (EPS) compared to $1.49 from a year prior was something the entire market looked at for reference, but here’s something they might have missed.
In the company’s quarterly earnings press release, Simon Property Group’s main drivers stand out. Net operating income (NOI) increased by 5.2% over the year, a widely watched metric in the world of real estate. Over the past 12 months, it outpaced inflation to show pricing power and leadership in the Group’s portfolio.
Occupancy is another big driver in real estate, and Simon Property Group reported net occupancy rates of up to 95.6%, higher than the 94.7% reported for the same quarter last year.
Simon Property Group Dividend PaymentsDividend Yield4.85% Annual Dividend$8.20 Annualized 3-Year Dividend Growth7.48% Dividend Payout Ratio104.46% Recent Dividend PaymentSep. 30 SPG Dividend History
Now, here’s what’s behind all the growth: base minimum rent per square foot increased by 3.0% over the year to $57.94.
The fact that both occupancy and rental rates went up together means that Simon’s tenants are not only of high quality but also happy with their leases and likely to continue to renew in the years to come, disqualifying any bearish theses regarding the importance of physical shopping real estate.
Now, for the part investors really want to know, the company announced a quarterly stock dividend of $2.05 a share, a $0.15 jump from last year, and a 7.9% growth rate.
On an annual basis, that would make today’s payout a yield of 4.9%, beating both inflation and the ‘risk-free’ rate of return in the U.S. treasury bond yields.
The Market’s Outlook on Simon Property Group Stock and Its Future Prospects
Faced with this growth and fundamental tailwinds built into the company’s real estate portfolio, bearish traders decided to stay away from this company, as judged by the stock’s low 1.8% short float today. But the bullishness for retail investors to consider doesn’t end there.
Simon Property Group Stock Forecast Today12-Month Stock Price Forecast:$162.78-3.69% DownsideHoldBased on 9 Analyst RatingsHigh Forecast$175.00Average Forecast$162.78Low Forecast$145.00Simon Property Group Stock Forecast Details
Analysts at Piper Sandler decided to boost their price targets for Simon Property Group stock up to $175 a share.
This directly calls for a net upside of 5.2% from where the stock trades today, which seems a bit conservative compared to the doubling in EPS Wall Street expects out of the company next year.
This sentiment made it out of Wall Street as well; investors can look at the $4.6 billion in institutional capital that made its way into the company over the past 12 months, reaching a 93% institutional ownership rate today.
Leading the way as of August 2024, those at HSBC Holdings decided to boost their holdings by 6.7% to net their investment up to $162.7 million today.Before you consider Simon Property Group, you’ll want to hear this.MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Simon Property Group wasn’t on the list.While Simon Property Group currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buys.View The Five Stocks Here Just getting into the stock market? These 10 simple stocks can help beginning investors build long-term wealth without knowing options, technicals, or other advanced strategies.Get This Free Report
Like this article? Share it with a colleague.
Link copied to clipboard.
