Investors Eyeing Macerich’s Dividend Yield
Macerich, a mall-focused real estate investment trust (REIT), has caught the attention of investors due to its attractive dividend yield of 5%. This yield is significantly higher than the average of 1.63% from an S&P 500 index fund and the 3.5% from the average REIT, as represented by the Vanguard Real Estate Index ETF.
A Slow Recovery for Macerich
The company has been slowly recovering from the impact of the pandemic, with its dividend beginning to grow again in late 2022, rising from $0.15 per share per quarter to the current $0.17. Although this represents a 13% increase, the dividend remains well below the pre-pandemic level of $0.75 per share per quarter.
Operationally, Macerich has seen a mixed performance. Its tenants generated sales of $869 per square foot in 2022, an improvement from the $801 in 2019 before the pandemic. However, occupancy rates are only at 92.6%, compared to the 94% in 2019, and average rent per square foot has only increased from $61.02 in 2019 to $63.06 in 2022.
Simon Property Group: The Main Rival
Macerich’s main competitor, Simon Property Group, also cut its dividend in 2020 for the same reasons. However, Simon’s cut was not as severe, dropping from $2.10 per share to $1.30 per share, a 38% decrease compared to Macerich’s 80% cut. This is due to Simon having a stronger balance sheet, with a financial-debt-to-equity ratio of 0.7, compared to Macerich’s ratio of 2.5.
As a result, Simon’s dividend has increased six times since it was cut and currently stands at $1.80 per share per quarter, while its operating performance has also been strong, with tenants reporting sales per square foot of $753 in 2022, up from $693 in 2019, and an occupancy rate of 94.9%.
Two Options for Investors
For conservative dividend investors, Simon may be a better option due to its stronger financial foundation and higher yield of 5.7%. On the other hand, for more aggressive investors, Macerich may have more potential for growth in its dividend as its business continues to recover and its balance sheet strengthens. However, given the lower yield, it appears that investors may already be pricing in a higher dividend for Macerich’s stock.