Simon Property Group

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$32 billion retail real estate investment trust Simon Property Group ( SPG) is another name that's seen pressure from its positioning. With exposure to the troubled commercial real estate market, it's no surprise that investors have been wary of SPG's wherewithal -- especially as outwardly similar peers dealt with bankruptcies. But this REIT's risks have been overplayed.

Like most REITs, Simon Property Group is more of an income generation vehicle than a way to gain exposure to commercial real estate. The firm signs on tenants with long-term triple-net leases that essentially insulate SPG from most of the risks that come from the ebb and flow of the real estate market. As a result, the only real economic stressors on the firm come in the event of a tenant going out of business. Given that most tenants are large retail chains, that's a rarely rare event even in the height of a recession.

Right now, Simon is in solid financial shape. The firm has a liquid balance sheet with more than $2 billion in cash and investments. Investors who held SPG through the recession took valuation hits as the firm wrote down its real estate assets. While that book value can't go back up, the result is a balance sheet that grossly understates SPG's real assets. Investors should welcome that conservatism.

They should also like the income generation; SPG currently pays out a 2.9% dividend yield. Built-in inflation adjustments in the firm's leases should keep this stock a step ahead of the diminishing buying power of the dollar.

>>Large-Cap Stocks With Room to Grow Dividends

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