Tag Archives: NYSE:SPG

Strong Dividend Stocks in the Retail Space Exists?!

If you’ve been following Sears Holdings Corp. (NASDAQ:SHLD) and Macy’s Inc.’s (NYSE:M), it may be difficult to believe that strong companies in the retail space still exist.

Sears had been posting losses since 2012. And Macy’s fundamentals have been deteriorating since 2015; its long-term growth is estimated to be about 2% per year, which would be hardly keeping pace with inflation. One should, of course, avoid investing in these types of retailers.

However, it’s not all bad in the retail space. Here are a few quality stocks whose fundamentals have remained strong as they face the challenges in the industry.

shopping mall

Simon Property Offers a ~4.4% Yield

Simon Property Group Inc. (NYSE:SPG) is a global leader, which owns premier shopping, dining, entertainment and mixed-use destinations with properties across North America, Europe, and Asia.

In the second quarter, Simon Property slightly increased its guidance for the year (due to the elimination of some debt), and now estimates to generate $11.14 to $11.22 funds from operations per share, which would represent a growth of ~7% compared to 2016.

As well, management also increased its quarterly dividend to $1.80 per share, which represents a boost of nearly 9.1% from a year ago. Simon Property has hiked its dividend payout every year since 2011.

At ~$164.50 per share, Simon Property is reasonably priced at a multiple of ~15 (and some say even undervalued because the quality shares have historically commanded a premium multiple of ~18). Here the best three places to look for safe dividend income.

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The Best 3 Places To Look For Safe Dividend Income

If history gives a hint about the future, it indicates that companies in certain industries tend to generate stable earnings or cash flows that lead to stable dividends.

If we choose the quality companies from these industries, we can then build a diversified portfolio that generates a secure, growing income stream. Below, I list some possibilities.

Utilities: A Must-Own Sector

Earnings generated by utilities are relatively stable because people need to use electricity, gas, and water, etc. no matter if the economy is doing well or not.

One utility that came out strongly from the last recession was Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP). Since 2009 it has been a five-bagger.

Brookfield Infrastructure is a rock solid utility, which owns and operates a global, quality portfolio of infrastructure assets, including toll roads, railroads, ports, pipelines, and telecom towers.

Its trusted management, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), employs value investing and actively recycles mature assets for higher returns. Because management owns 30% of the partnership, retail unitholders can expect the management to be unitholder-friendly.

Indeed, Brookfield Infrastructure has increased its distribution every year since 2009. Going forward, it gives the guidance to grow its distribution by 5-9% per year. Currently, it offers a yield of 4.5% to start.

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