*i wonder dividend stocks like spg works here because we had 6% yields without any risk. may be need to be careful here buying SPG.

This is worth a discussion. Let’s start with Graham’s method of assessing margin of error wrt p/e’s. He used the 10-y

ear U.S… treasury rate as a bench market as he was buy and hold. 10-year. Inverting that rate provided a number that can be compared to a p/e. The 10-year being a safe standard number, the p/e should be less. I believe he looked for a 1/3 safety margin.

A reasonable question would be, "what 10-year rate? Today’s? or forward looking in a rapidly changing interest rate environment. Venumadi is looking forward to 6% rate for 10-year and I think that is reasonable. We think we know that the Fed will keep raising, or at least “wants” to, and I feel that 4.5% is probable. The curve might invert, but if the Fed’s action succeeds in taming inflation without a nasty recession, the curve should have positive slope. So 6% for the 10-year in that circumstance should be considered as possible, IMO.

Now, the 10-year is currently 3.796% which inverts to a “p/e” of 26.3. At 6.5%, the bond “p/e” is 15.4. The 1/3 safeties would be 17.6 and 10.3. I am not really sure whether p/e is correct comparison for SPG as they have depreciation and such. Free cash flow per share is probably better than eps. But in any case, the p/e 13.6 currently, TTM. The p/e looking to 2022 est earnings is 16.1, and 2023 is 14.9.

A discussion could be had as to whether the current 10-year rate is appropriate to use for the safe p/e, or my forecast 6.5%. But at current rate, the SPG p/e does provide a 1/3 safety.

The 2022 and 2023 fcf/share are $8.70 and $!0.58 and those p/fcf are 10.2 and 8.4 and that satisfies the 1/3 safety for even 6.5% 10-year rate. For the kind of business that SPG has, FFO rather than FCF is used. They seem very similar toi me, but:

** Funds from operations (FFO) is the actual amount of cash flow generated from a company’s business operations.*

*To calculate the net FFO, one must add the non-cash expenses or losses that are not actually incurred from the operations, such as depreciation, amortization, and any losses on the sale of assets, to net income. Then subtract any gains on the sale of assets and interest income.*

*FFO is commonly used by companies that engage in Real Estate Investment Trusts (REITs), a business that primarily operates on income-generating real estate transactions**

In addition, if we look through the recession, what probability do we place on the share price of SPG to return to $125 or more? $125 is the average of the top ranked analysts for SPG. And, there is the 7.5% dividend as long as SPG does not need to cut. So with the hopefully not misplaced trust in SPG management, and past performance thereof, I chose to invest in SPG even in the face of tougher comparison to 10-year treasury yields.

I have 27% in SPG, 1% in OKE, 2% in 1-year T’s, and 39% cash.

KC