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Simon Property Group's surprising decision to pay out its fourth- quarter dividend in the form of 90 percent stock instead of cash could trigger a new trend for retail REITs.

Simon made the announcement during its 2008 year-end results report. Paying dividends with stock makes it easier for REITs to deal with the freeze in the credit markets and provides a buffer against debt maturities, say analysts. Simon is taking advantage of guidance recently handed down by the Internal Revenue Service. The ruling remains in effect through 2009.

If adopted for the remainder 2009, the stock dividend policy will allow Simon to retain $925 million in cash this year. Over the next two years, Simon faces approximately $3.7 billion in debt maturities, according to SNL Financial LC. The figure represents more than 20 percent of Simon's total long-term debt. However, analysts warn, the move could also put off investors. Indeed, the immediate reaction was an 8 percent drop in its stock price.

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