Is SPG’s Attractive Dividend Yield Worth the Risk?

Simon Property Group stock is up over 30% in the past year

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Simon Property Group, Inc. (NYSE:SPG) is a real estate investment trust (REIT) engaged in the ownership of shopping, dining, entertainment, and mixed-use destinations. SPG owns properties across North America, Europe, and Asia, primarily offering shopping malls, outlet centers, and community/lifestyle centers. At last check, SPG is trading up 1.2% at $144.92.

On Feb. 3, Simon Property Group announced "Grab Go Eat," a new collaboration with Kitchen United. Through the "Grab Go Eat" platform, customers can order from multiple restaurants in a single transaction for on-mall pickup or home delivery, allowing guests to choose whether food is delivered to their table or any store within the shopping center as well as skip the lines and pick up food directly from the restaurant or on premise food lockers.

Simon Property Group stock has increased about 36% year-over-year and is currently up 40% since dropping to a 52-week low of $103.10 last February. However, shares of SPG have decreased 10% year-to-date and Simon Property Group stock is currently down 16% from a multi-year high of $171.12 reached in mid November.

Moreover, the REIT offers a forward dividend of $6.60 with a strong dividend yield of 4.61%, making SPG one of the highest returning dividend stock available in the S&P 500 and the S&P 100. Despite that, Simon Property Group stock does not provide a high level of assurance with its core fundamentals. 

Furthermore, SPG holds an ugly balance sheet with just $438.42 million in cash and $26.09 billion in total debt. Additionally, Simon Property Group stock trades at an elevated valuation, with a forward price-earnings ratio of 23.09 and price-sales ratio of 9.85, making SPG best suited for dividend-focused investors.

Regardless, optimism is prevalent in the options pits, per SPG's 10-day call/put volume ratio of 2.00 at the  International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 80% of other readings in its annual range, meaning calls have rarely been more popular in the last 12 months.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.88 stands higher than just 11% of readings from the past 12 months. In other words, short-term options traders have rarely been more call-biased.

 




 
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