To The Moon

$Simon Property(SPG)$

One of the clearest indicators that a management team has confidence in their company is when we see insider purchases. The reality is that insiders typically buy their own stock for one main reason: they believe the price is going to rise. Data supports this, showing that stocks with significant insider buying tend to outperform the market over time. In this articles, we’ll look at three dividend stocks that have recently seen insider purchases.

Simon Property Group (SPG)

Let’s start with Simon Property Group (SPG), a real estate investment trust (REIT). Examining its insider purchasing history, we see about 10 insiders began buying shares, with a noticeable trend of more insider buys than sales over the past day to three years. It's important to note that the fact these directors bought shares on the same day likely indicates a planned purchase, but it's still a positive sign for the company.

If you're not familiar with Simon Property Group, they are a significant dividend payer with a starting dividend yield of about 5%. While many REITs have faced challenges over the past year, Simon Property Group has seen an impressive 22% increase in value, not including dividends. The company is known for its high-quality real estate portfolio, with prime locations attracting affluent customers. They focus on properties in areas with high foot traffic, such as regional malls, premium outlets, office spaces, hotels, and luxury properties.

Their strategy has its strengths and weaknesses. For example, Simon’s properties saw a 6.4% traffic increase over Black Friday weekend, a good sign for the company. However, there are challenges as well, such as the need to adjust their dividend during economic downturns. In 2020, they had to significantly cut their dividend from $2.10 to $1.30, although it has since recovered to pre-2020 levels, growing at an annual rate of about 5.32% over the last decade.

Earning Overview

In the third quarter of 2024, Simon Property Group (SPG) reported funds from operations (FFO) of $2.84 per share, a decline from $3.20 per share in the same quarter the previous year and below analysts' expectations of $3.03 per share. Despite this, the company reported lease income of $1.34 billion, slightly exceeding market expectations.

Occupancy levels at SPG's malls and premium outlets increased by 1% year-over-year to 96.2%, and base minimum rent rose by 2.3% to $57.71.

These figures suggest that while SPG faced challenges in FFO during Q3 2024, it maintained strong occupancy rates and rental income, indicating resilience in its core operations.

Share Dilution

Despite the economic sensitivity of their business, Simon Property Group has kept its share dilution relatively low compared to other REITs. Over the past decade, the number of shares outstanding has remained mostly steady, with only a small increase in 2020, signaling better shareholder value preservation.

Dividend Yield

SPG’s attractive dividend yield of around 5% continues to appeal to income-focused investors, supporting positive sentiment among long-term investors who rely on consistent income from dividends.

Valuation

Price-to-FFO Ratio: Simon Property Group typically trades with a price-to-FFO ratio that is competitive within the REIT sector. As of 2025, this is around 13.41, which is considered reasonable for a high-quality REIT.

Discounted Cash Flow (DCF): Using a discounted cash flow (DCF) model, analysts estimate the fair value of the stock to be in the range of $173-$188, aligning closely with the current market price.

Let me highlight two key valuations for this stock. The first is the historical price-to-FFO (Funds From Operations) valuation, which looks at how the company has been valued in the past. If we examine the data, we see that the company’s valuation has generally trended downward. The decline in 2020 is understandable, but looking at the current valuation, with a price-to-FFO ratio of 13.41% and a discount rate of 8.5%, we arrive at a dividend discount model price of around $173-$188 per share. This aligns closely with the current share price, making it an attractive option for dividend investors.

Risk & Challenges

Fluctuating Retail Trends: The shift in consumer behavior, especially post-pandemic, is creating uncertainty for traditional retail models. SPG's reliance on physical retail spaces leaves it somewhat exposed to ongoing changes in the retail landscape, including e-commerce growth and the evolving preferences of shoppers.

Debt Levels and Interest Rates: Like many REITs, SPG uses debt to finance its operations and expansion. Given the current environment of rising interest rates, there are concerns about the impact of higher borrowing costs on SPG's profitability and ability to refinance debt at favorable rates. While the company’s balance sheet remains relatively stable, rising interest rates could still put pressure on its cost of capital.

Retail Market Volatility: The retail sector remains vulnerable to changes in consumer behavior, economic downturns, and disruptions like e-commerce.

Dividend Sensitivity: While the company has a strong dividend history, economic slowdowns and changes in consumer spending patterns can put pressure on its ability to sustain dividends.

Recent Performance

Post-COVID Recovery: SPG’s stock has rebounded well after the pandemic, supported by a strong recovery in retail activity, especially in premium locations and luxury retail. The company's properties are among the highest quality in the industry, which positions it well in a post-pandemic world.

Shareholder Value: The company has been actively working to minimize share dilution, and it has shown relatively stable share counts, enhancing shareholder value.

Market Sentiment

Market sentiment toward Simon Property Group is generally positive, but tempered with some caution. Investors appreciate its solid portfolio of high-quality retail properties, strong occupancy rates, and reliable dividend payouts. However, challenges in the retail sector, economic uncertainty, and rising interest rates create risks that could affect its performance in the future. As a result, while SPG remains a strong pick for dividend investors, there is a sense of cautious optimism rather than unbridled enthusiasm.

Insider Purchases: There has been some positive sentiment surrounding insider buying activity in SPG. The recent purchases by company executives are seen as a signal that insiders have confidence in the company’s future performance, which can help bolster investor trust.

Analyst Consensus: Analyst sentiment around SPG is generally favorable, with many analysts continuing to rate it as "Buy" or "Hold." The company's stable dividends and strong property portfolio make it an attractive long-term investment for those looking for income and exposure to prime real estate. However, the company's sensitivity to retail market trends and economic conditions keeps some analysts cautious.

Conclusion

Simon Property Group (SPG) remains a solid choice for dividend investors, thanks to its high-quality properties, strong dividend yield, and recovery from the challenges posed by the pandemic. However, its exposure to consumer spending and retail market trends means it carries some economic sensitivity, especially in times of economic downturn or e-commerce growth. Still, for investors seeking stable income and exposure to prime real estate, SPG’s fundamentals make it a strong contender in the REIT sector.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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