Simon Property Group And Its 8% Dividend Yield Is My Highest Ever Conviction Buy

Cheap valuation does not always mean low quality.
Pro-forma for the TCO acquisition, approximately 80% of NOI will come from a trophy asset portfolio with sales psf greater than $900.
SPG is too cheap at an 8% dividend yield.
SPG is a conviction buy.
Who said that cheap stocks can’t get cheaper? I certainly didn’t, and I am thankful for that, as Simon Property Group (SPG) has sold off along with the rest of the market in response to developments surrounding the coronavirus, in spite of arguably trading at a deep discount to fair value prior to the selloff. With shares trading at around an 8% dividend yield, investors looking towards 2021 may find the stock ready to rebound on the backs of significant contributions from completed redevelopments and ongoing improvements to retail occupancy. I rate shares a conviction buy.
The Cheap Get Cheaper
SPG owns high-quality Class A malls and outlets both domestically and internationally. The common narrative that malls are dying at the hands of e-commerce has sent shares into free fall. That was prior to the coronavirus outbreak - the coronavirus added yet more reasons to hate malls: perhaps travel will decline, discretionary spending will decline, and people won’t even have a chance to go to the mall due to being quarantined at home. This simple yet easy to understand logic pretty much sums up the bloodbath that has taken place over the past twelve months:

(Yahoo Finance)
When stocks get cheap, it is easy to allow the cheap valuation to negatively affect one’s assessment of the underlying quality. It is easy to forget that even high-quality companies can trade at junk valuations.
SPG’s mall properties are highly performing and can be considered “cream of the crop” with average tenant sales psf of $693. SPG has disclosed that 70% of NOI comes from malls with an average sales psf of greater than $900. Class-A malls typically have average sales psf greater than around $520, meaning that... Read more

Older articles featuring TCO: