Let's reconvene for this week's stock diss at your local mall's food court.

There's a lot of extra elbow room in many of the country's malls these days, so we may as well take advantage of the ample parking, going-out-of-business sales, and those free food samples on toothpicks.

Now, where was I? Oh, right, I'm back to the "Throw This Stock Away" column, where I single out a stock that I think is heading lower. I'm no Grinch, though. I always come back with three alternative investments that I believe will perform better than the stock being heaved into the garbage.

Who gets tossed out this week? Come on down, Simon Property Group (NYSE:SPG).

So that's why they call them mall rats  
Simon is the country's largest mall operator. It's holding up pretty well, on the surface. It closed out a difficult 2008 with funds from operations (FFO) -- the key metric in gauging a REIT's health -- clocking in 9.5% higher.

There are a few cracks showing, though. Simon also watches over outlet malls and lifestyle centers, but regional malls have been its bread and butter, and I spotted a troublesome trend there in last year's results. See whether you can spot my cause for concern.









Sales per square foot




Rent per square foot




Simon's shareowners may cheer the company's ability to milk more rent out of its tenants, but how prudent is that approach when sales are faltering? It's no coincidence that occupancy slipped. The trend continued during this year's first quarter, with occupancy down to 90.8% as sales fell and rent rates spiked.

When even once-hot mall magnet Abercrombie & Fitch (NYSE:ANF) is shuttering concepts, you know that the landlords are hurting.

Don't let the past few months of bubbling consumer confidence kid you. Simon's pain is just beginning. Analysts know it. Three months ago, they expected Simon to generate FFO of $6.20 a share this year and $6.11 a share come 2010. Now it sees $5.90 and $5.72 in FFO per share over the next two years, respectively. That's after ringing up $6.42 a share in FFO last year, so we're talking about a company that won't grow again until 2011 at the earliest.

Along the way, how much smarter will retailers get about selling online? How will malls compete with Microsoft's (NASDAQ:MSFT) new Bing search engine, now paying customers to shop through its affiliates? Which way do you see occupancy levels heading as more chains scale back?

You can take comfort in Simon's hefty yield if you want, but it's really no different from a store mannequin: easy on the eyes, a breeze to dress up, but oh-so-very dead.

Back in January, Simon's quarterly dividend of $0.90 a share came with a catch. Only 10% of it would be in cash, with the other 90% paid out in stock. The result is like slashing its dividend by 90%. Simon has since officially cut its payouts to $0.60 a share, with no more than 20% in cash. Income chasers eyeing the tempting 4.8% yield should know that the cash yield is less than 1%.

Simon is the top dog in a dying industry. You can do better. 

Good news
As I have every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting tossed. Let's go over three new fill-ins.

  • Wal-Mart (NYSE:WMT): You won't find Wal-Mart anchoring many suburban shopping malls. The discounter prefers to work alone or in strip centers where it dominates the landscape. It also doesn't hurt that the world's largest retailer offers great prices and runs a warehouse club that serves up even bigger savings in bulk. By beefing up its grocery selection, Wal-Mart now gets even more regular access to its customers. Having them come through the door more often makes it all the easier to move the apparel and electronics that may have otherwise been sold at a mall merchant, if Wal-Mart hadn't been so convenient. 
  • Amazon.com (NASDAQ:AMZN): The leading online retailer continues to grow at a healthier clip than the market. Net sales and earnings rose 18% and 24%, respectively, in its latest quarter. However, the real mall killer in Amazon's arsenal is Prime, which lets folks pay $79 a year for free two-day shipping on any Amazon-stocked items. The service boosts loyalty, as shoppers check out Amazon's virtual storefront before firing up the car to trek out to the suburban mall. One can also argue that Overstock.com (NASDAQ:OSTK) will eat into Simon's outlet mall operations, but Amazon is the mainstream play on mall replacement. 
  • eBay (NASDAQ:EBAY): I know that I've knocked eBay in the past, but the stock is now cheap enough to reconsider, warts and all. Given its growing PayPal platform and its global collection of online marketplaces, eBay is a major reason why real-world transactions have gone online. Even if it has to charge lower fees to compete with the plethora of free listing sites and mend fences with its power sellers, eBay isn't going away.

Farewell and thanks for all the toothpicks, food court.

Other headlines out of the weekly trash can:

Amazon.com and eBay are Motley Fool Stock Advisor picks. eBay, Microsoft, and Wal-Mart Stores are Motley Fool Inside Value recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz will probably still hit a mall this weekend, if only to pad his toothpick collection. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.