In the world of retail real estate investment trusts (REITs), two names consistently dominate investor conversations: Realty Income Corporation O and Simon Property Group, Inc. SPG. Both are giants in their respective corners of the retail landscape — Realty Income with its single-tenant net lease portfolio and Simon Property with its premium mall and outlet centers. 

But as market dynamics shift and interest rate pressures persist, which REIT makes the smarter buy today? Let’s break down the investment case for both, comparing their portfolios, dividend reliability, balance sheets and long-term outlooks.

The Case for Realty Income

Realty Income’s business model focuses on triple-net lease properties, often tenanted by essential retail like convenience stores, grocery, pharmacies and dollar stores. Tenants are responsible for taxes, insurance and maintenance, which makes Realty Income’s income stream predictable and low-risk. As of Dec. 31, 2024, O boasts 15,621 properties spanning all 50 U.S. states, the U.K. and six other European countries, with a focus on investment-grade tenants.

Growth for Realty Income largely comes through acquisitions. In recent years, it has been active in expanding internationally, notably into Europe, and diversifying beyond retail into industrial and gaming sectors. The company's scale allows it to close large transactions, and its net lease structure means it can add properties with minimal operating overhead. Its move into non-traditional asset classes, including gaming and data centers, highlights its strategic focus on future growth. 

O now expects a full-year 2025 investment volume of approximately $4 billion. Moreover, with the company estimating the total addressable market for net lease real estate investments in the United States of $5.4 trillion and another $8.5 trillion in Europe, Realty Income has a solid investment opportunity.

Realty Income boasts a strong balance sheet and enjoys A3 /A- credit ratings by Moody’s & S&P, one of the highest among REITs. O ended 2024 with $3.7 billion in liquidity and a fixed charge coverage ratio of 4.7. Net debt to annualized pro-forma adjusted EBITDAre was 5.4X, signaling conservative financial management. Moreover, Realty Income has a well-laddered debt-maturity schedule with a weighted average maturity of 6.6 years.

Realty Income has a solid track record of consistently paying dividends. In March, the retail REIT announced its 130th dividend hike since its listing on the NYSE in 1994. “The Monthly Dividend Company” has delivered 23 dividend increases over the past five years. It has delivered 30 consecutive years of rising dividends and 110 consecutive quarterly increases. O has witnessed compound average annual dividend growth of 4.3% since 1994. This track record underscores its resilience and solidifies its appeal as a reliable, income-focused investment for shareholders. Check Realty Income’s dividend history here.

However, tenant bankruptcies may challenge Realty Income’s rent growth, while uncertainty around tariffs could further strain retailers in its portfolio, potentially impacting overall performance. The company’s bad debt provision rose to 75 basis points from 50 in 2024, driven by difficulties with a few struggling tenants, many acquired through M&A transactions. Management noted three key tenants, including a major office tenant, though they anticipate effective rent recapture despite short-term risks.

The Case for Simon Property Group

Simon Property, on the other hand, is the king of U.S. malls. With interests in more than 200 properties — many in Class A malls and outlet centers — Simon benefits from its premier retail real estate footprint and deep relationships with top-tier retailers. The company also invests in joint ventures and focuses on tapping its growth opportunities by assisting digital brands in enhancing their brick-and-mortar presence. Simon Property also capitalized on buying recognized retail brands in bankruptcy. Therefore, while Realty Income’s model offers steadiness and recession resilience, Simon’s offers cyclical upside and greater exposure to consumer sentiment.

While Realty Income’s growth is largely inorganic, driven by acquisitions, Simon Property, on the other hand, is more entrepreneurial. Apart from acquisitions, SPG reinvests in redeveloping underperforming malls, developing mixed-use spaces, expanding outlet properties and has made bold moves like investing directly in retailers, such as JCPenney and Forever 21. This proactive, value-creation approach positions SPG for a stronger rebound with brick-and-mortar retail continuing to evolve.

From a balance sheet point of view, Simon Property carries a solid A credit rating as well, with a similarly long debt maturity profile. The company exited the fourth quarter of 2024 with $10.1 billion of liquidity. This consisted of $2 billion cash on hand, including its share of joint venture cash and $8.1 billion of available capacity under its revolving credit facilities. As of Dec. 31, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.5, ahead of the required level. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.

Solid dividend payouts are the biggest enticement for REIT investors, and Simon Property is committed to boosting shareholder wealth. After slashing its dividend during the pandemic, it has since resumed dividend hikes, with the most recent one being declared concurrent with the third-quarter 2024 earnings release, whereby the company increased the dividend payment to $2.10 per share from $2.05 paid out earlier. This marked a hike of 2.4% from the prior dividend payment. This retail REIT has increased its dividend 13 times in the last five years. This spate of dividend increases brings relief to investors and reaffirms confidence in this retail landlord. 

However, given the convenience of online shopping, it is likely to continue to be a popular choice among customers. This is likely to adversely impact the market share for brick-and-mortar stores and affect retail REITs, including Simon Property. Moreover, macroeconomic uncertainty and a still high-interest-rate environment are likely to limit consumers’ willingness to spend to some extent.

How Do Estimates Compare for Realty Income & Simon Property?

The Zacks Consensus Estimate for Realty Income’s 2025 sales and funds from operations (FFO) per share implies year-over-year growth of 5.85% and 2.39%, respectively. However, FFO per share estimates for 2025 and 2026 have been trending southward over the past 60 days.

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The Zacks Consensus Estimate for Simon Property’s 2025 sales and FFO per share implies year-over-year growth of 2.58% and a decline of 3.46%, respectively. However, what is encouraging is that FFO per share estimates for 2025 and 2026 have been trending northward over the past 60 days.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Price Performance and Valuation of O & SPG

Year to date, Realty Income shares have risen 3.4%, while Simon Property stock has declined 13.9%. In comparison, the Zacks REIT and Equity Trust - Retail industry has been down 11.7%, while the S&P 500 composite has dropped 9.1% in the same time frame.

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O is trading at a forward 12-month price-to-FFO, which is a commonly used multiple for valuing retail REITs, of 12.78X, closer to its one-year median of 13.02X. Meanwhile, SPG is presently trading at a forward 12-month price-to-FFO of 11.72X, which is comfortably below its one-year median of 13.23X.

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Conclusion

Realty Income’s essential retail portfolio, monthly dividends and fortress balance sheet make it a reliable choice for income-focused investors. Its low-risk model and consistent performance justify its premium valuation. However, Simon Property Group presents a more compelling opportunity for value-oriented investors willing to take on modestly higher risk. 

With premier mall assets, strong cash flows and creative reinvestment strategies, SPG is well-positioned to benefit from consumer sentiment and economic tailwinds. Both companies are investment-grade and well-managed, but SPG's attractive valuation, upward estimate revisions, solid dividend yield and potential for a valuation re-rating offer greater upside. For investors with a longer time horizon, Simon Property represents the smarter buy — balancing quality and growth at a discount.

While SPG carries a Zacks Rank #2 (Buy), O has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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