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Simon Property Group is seeking to reopen half of its malls in a bid to get back to business as the coronavirus lockdowns ease across the U.S. Simon Property is first in the list and is followed by UPS, which recently issued a profit miss despite strong revenues. Third in the list is networking giant Cisco, which reported falling revenues and higher profits. 3M, the industrial conglomerate, closes the list.
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Simon Property Group
Simon Property Group (SPG) has taken the first place in the list this week with a rise in viewership of 69%. The largest publicly-listed mall owner in the U.S. said recently that it plans to open half of its malls as the lockdown measures are easing throughout the U.S.
The company’s founder David Simon said he was encouraged by the consumer response in a few of the already-opened malls, adding that shopping chains that filed for bankruptcy, such as Dillard’s and Neiman Marcus, are looking to reopen stores.
However, Simon Property declined to break down how much rent it took in April. It provided few details about its current profitability and failed to provide an outlook. Therefore, Simon might either cut its payouts to shareholders or walk away from a deal to buy Taubman Centers if the terms are not improved, according to real estate activist investor Jonathan Litt.
Simon Property said its funds from operations declined to $980 million in the first quarter from $1.08 during the same period last year. Simon also said it eliminated or postponed more than $1 billion of expenses related to new development and redevelopment projects as it aims to decrease costs during the health crisis.
Simon’s dividend yields a staggering 15%, a sign that it is unsustainable. Its payout ratio currently stands at 140%. It has grown its dividend for the past 10 years.
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United Parcel Service
United Parcel Service (UPS) has taken the second place in the list this week with an advance in viewership of 41%. UPS stock has declined 17.6% so far this year, underperforming the benchmark S&P 500 Index by 8 percentage points.
For the first quarter of the year, UPS reported that its net income fell to $965 million from $1.11 billion a year ago, while revenues rose 5.1% to just over $18 billion. Domestic revenues increased 9.3%, while international income declined 2.2%. The company blamed the relatively poor results on “significant headwinds” from the impact of the coronavirus pandemic, as well as higher self-insurance accruals.
The company fell short of providing guidance for the full year given the uncertainty stemming from COVID-19, but noted that its expenses will be $1 billion lower than previously estimated. It also suspended its stock repurchases for the year.
UPS pays out around 75% of its profits to shareholders, equaling a dividend yield of 4.4%. UPS has been growing its dividend for the past 10 years. On May 14, UPS declared an unchanged regular dividend on its class A and Class B shares, payable on June 10 to shareholders of record on May 26.
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Cisco Systems (CSCO) has seen its viewership rise 32% over these past two weeks, taking the third spot in the list. Cisco shares have been rather resilient during the COVID-19 sell-off, beating the benchmark S&P 500 by 2 percentage points since the start of the year.
The relatively strong performance was in part due to the company selling teleconferencing tools, which have been popular in the stay-at-home economy. Notwithstanding, the company has not been insulated from the demand shock across its other business lines, which include network services and internet security services.
For the third quarter, revenues decreased 8% to $12 billion, while adjusted earnings per share declined 1% year-over-year to $0.79. Guidance for the fourth quarter was revised down, with revenues expected to fall between 8.5 and 11.5%, and adjusted earnings per share to come in at between $0.72 and $0.74.
Cisco has increased its dividend for the past 9 years and its current dividend stands at 3.2%, while its payout ratio is 45%.
3M (MMM) is last in the list with a tepid advance in viewership of 17%. The consumer goods and industrial conglomerate, which does a host of simple household and medical products, has seen its stock shed 16% since the start of the year, underperforming the S&P 500 Index, which declined 9.5%.
3M recently withdrew its full-year guidance due to uncertainty stemming from the COVID-19 pandemic, but committed to providing monthly updates on its results to investors. Total sales for April declined 11% to $2.3 billion. Its healthcare unit enjoyed an increase of 5% in sales, while its consumer unit declined by a similar amount. Safety and industrial sales plunged 11%, while transportation and electronics fell 20%.
3M pays an annual dividend of $5.88 per share, yielding nearly 4%. The company has grown its payout for the past 61 years.
The Bottom Line
Simon Property Group is reopening half of its malls, although the good news has been overshadowed by lack of details on rent collection. United Parcel Service’s financial results have been impacted by the COVID-19 pandemic, although the firm confirmed its dividend. Cisco has outperformed the broader market as demand for teleconferencing tools has increased. 3M said its April sales declined, as the company substituted its annual guidance with monthly reports on its finances.
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