Simon Property Group (SPG) and Retail Opportunity Investments (NASDAQ:ROIC) Critical Survey

Retail Opportunity Investments (NASDAQ: ROIC) and Simon Property Group (NYSE:SPG) are both mid-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, risk, earnings, dividends and valuation.

Dividends

Retail Opportunity Investments pays an annual dividend of $0.75 per share and has a dividend yield of 4.0%. Simon Property Group pays an annual dividend of $7.40 per share and has a dividend yield of 4.5%. Retail Opportunity Investments pays out 220.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Simon Property Group pays out 130.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Simon Property Group has raised its dividend for 8 consecutive years. Simon Property Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Retail Opportunity Investments and Simon Property Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Retail Opportunity Investments 14.13% 2.86% 1.34%
Simon Property Group 31.96% 41.85% 6.09%

Institutional and Insider Ownership

97.4% of Retail Opportunity Investments shares are held by institutional investors. Comparatively, 47.4% of Simon Property Group shares are held by institutional investors. 2.2% of Retail Opportunity Investments shares are held by insiders. Comparatively, 8.4% of Simon Property Group shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Retail Opportunity Investments has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500. Comparatively, Simon Property Group has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500.

Earnings and Valuation

This table compares Retail Opportunity Investments and Simon Property Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Retail Opportunity Investments $237.19 million 8.68 $32.48 million $0.34 55.18
Simon Property Group $5.44 billion 19.48 $1.84 billion $5.67 29.19

Simon Property Group has higher revenue and earnings than Retail Opportunity Investments. Simon Property Group is trading at a lower price-to-earnings ratio than Retail Opportunity Investments, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Retail Opportunity Investments and Simon Property Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Retail Opportunity Investments 0 4 3 0 2.43
Simon Property Group 0 5 11 0 2.69

Retail Opportunity Investments currently has a consensus price target of $22.17, suggesting a potential upside of 18.16%. Simon Property Group has a consensus price target of $191.88, suggesting a potential upside of 15.93%. Given Retail Opportunity Investments’ higher possible upside, analysts plainly believe Retail Opportunity Investments is more favorable than Simon Property Group.

Summary

Simon Property Group beats Retail Opportunity Investments on 13 of the 17 factors compared between the two stocks.

Retail Opportunity Investments Company Profile

Retail Opportunity Investments Corp. (ROIC) is a fully integrated, self-managed real estate investment trust (REIT). The Company specializes in the acquisition, ownership and management of necessity-based community and neighborhood shopping centers on the west coast of the United States, anchored by supermarkets and drugstores. Retail Opportunity Investments Partnership, LP is the operating partnership of the Company. The Operating Partnership holds substantially all the assets of the Company and directly or indirectly holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business. As of September 30, 2017, the Company’s portfolio consisted of 87 properties totaling approximately 10.0 million square feet of gross leasable area (GLA). As of September 30, 2017, the Company’s portfolio was approximately 97.3% leased.

Simon Property Group Company Profile

Simon Property Group, Inc. is a self-administered and self-managed real estate investment trust (REIT). The Company owns, develops and manages retail real estate properties, which consist primarily of malls, Premium Outlets and The Mills. Simon Property Group, L.P. (Operating Partnership), is the Company’s partnership subsidiary that owns all of its real estate properties and other assets. As of December 31, 2016, the Company owned or held an interest in 206 income-producing properties in the United States, which consisted of 108 malls, 67 Premium Outlets, 14 Mills, four lifestyle centers, and 13 other retail properties in 37 states and Puerto Rico. As of December 31, 2016, it had redevelopment and expansion projects, including the addition of anchors, big box tenants, and restaurants, underway at 27 properties in the United States and it had one outlet and one other retail project under development.

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