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Simon Property Group(SPG - Get Report) is having a stellar year in 2012 - shares of the $47 billion real estate investment trust have rallied more than 20% since the first trading day of January. SPG is the biggest retail landlord in the U.S., with a massive portfolio of malls, outlet centers, and other retail locations, 245 million square feet of leasable space in all.
While most people think of REITs as ways to invest in real estate, they're really not. Instead, these vehicles are almost purpose-built income generation tools. REITs like Simon use long-term triple-net leases when signing new tenants, a lease structure that effectively insulates them from the ebb and flow of the real estate market (as well as property taxes, insurance, and maintenance) while providing predictable income generation.
Because most of Simon's properties are malls, SPG also gets to take a cut of tenant sales. That gives this particular REIT more exposure to consumer spending than real estate swings.
Another factor in SPG's income-focus is the fact that REITs are required to pay out the vast majority of their incomes as dividends for shareholders. Last Friday, SPG announced a 5.26% increase in its payout, hiking it to $1 per share; that's a 2.57% yield at current levels.
While it's not hard to find REITs paying out higher yields right now, SPG's size and financial strength make it a good choice for a core holding nonetheless.
SPG shows up on a list of
10 Stocks That Show the Real Estate Boom Has Arrived.