Santa Says Simon Has Been Very, Very Good This Year

NEW YORK (TheStreet) -- The nation's largest shopping center mall operator, Simon Property Group (SPG), has turned the latest report card in which the Indianapolis-based REIT has produced exceptional results. As Santa leaves the North Pole today to deliver goodies, it is clear that Simon investors will be enjoying the fruits of success in the form of dividends.

Simon has a market cap of around $48.8 billion and the company owns, develops and manages more than 590 retail properties (malls, shopping centers, and outlet centers) in North America, Europe, and Asia. With assets over $31 billion, Simon leases spaces to many "best in class" retailers such as Gap (GPS), Limited Brands (LTD), Abercrombie & Fitch (ANF), Foot Locker (FL), Forever 21, Ann Inc. (ANN), JC Penney (JCP) and Macy's.

Weighing down Santa's sleigh this year is Simon's robust funds from operations performance of $1.99 per share, up 16.4% from the third quarter of 2011. Year-to-date, Simon's FFO was almost $2.1 billion or $5.70 per share, up 14.7% over 2011.

Driving the international growth for Simon is the construction of five new Premium Outlet Centers, all scheduled to open in 2013. Two are in the U.S.: Chandler, Ariz., a suburb of Phoenix; and Chesterfield, Mo., a suburb of St. Louis. One is in Toronto, Canada. Another is in Japan and the fifth is in Busan, Korea. Simon's share of the development costs of these assets is expected to be approximately $325 million.

Santa will need to back up the bus (instead of the sleigh) to load up the Simon dividends. Recently the company announced the fifth consecutive increase in quarterly dividends from $1.05 to $1.10. The total dividend paid in 2012 is $4.10 as compared to $3.50 per share paid in 2011. That represents an increase of 17.1%.

In this year alone, Simon has increased its dividend by 5 cents a share in all four quarters and Simon's dividend is now 22.2% higher than it was immediately prior to the great recession. This is the highest increase among Simon's retail REIT peers, the second-highest among all S&P 500 REITs behind Public Storage (PSA). Current dividend levels for many REITs remain well below their 2008 levels.

Simon's 2012 FFO is expected to be at least 21% higher than the company's 2008 FFO immediately prior to the Great Recession. And this is significantly higher percentage than any of Simon's retail REIT peers.

Simon's stock price is currently trading at $157.80 per share, just 4% below the all-time high of $164.17 per share. In addition, Simon's stock price has climbed over 22% this year, outpacing the S&P 500's 14% rise. Simon's year-to-date total return is 25.79%, much stronger than the S&P 500 total return performance of 16.28%.

Simon Property Group is hitting all cylinders and the A- (S&P) rated mall REIT is flying high again. Santa should have no problem delivering durable dividends as Simon's annual dividend yield of 2.79% is well above the S&P average of 2.1%.

Simon is a "sleep well at night" REIT and Santa should have no problem delivering holiday cheer to the good boys and girls. Happy Holidays.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow Brad Thomas @swan_investor

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.