Why Is Simon Property's Dividend So High?
The Federal Reserve's spate of aggressive rate hikes has had all sorts of effects on the broader U.S. economy, including putting real estate investment trusts (REITs) in the discount bin. As a general rule, real estate investment trusts don't react well to rate hikes because they use a lot of debt to finance their operations and rising rates increase their borrowing costs. The market knows this and tends to sell off its holdings in REITs when rates start rising.
The REIT sell-off invariably results in rising dividend yields because of the relationship between yields and stock prices. But yields can rise for other reasons too. Simon Property Group (NYSE: SPG) is trading with a 6.6% dividend yield. Why is its yield so high?
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Source Fool.com
