Simon Property, which owns and manages shopping malls, had been reporting better-than-expected performance throughout the decline in retail sales. Its ability to generate strong earnings in the face of reduced mall traffic is impressive, but one cannot help but wonder if the travails of the retail store owners will eventually affect the company's cash flow.

In announcing the change in dividend payments, Simon relied on a rarely used provision in the trust agreement that permits the payment in stock rather than cash while retaining the favorable tax treatment accorded to REITs.

The ripples running through the REIT industry after the announcement threaten to become a tidal wave.

While Simon Property CEO David Simon sought to assure investors that the move was a prudent one designed to "fortify one of the industry's strongest balance sheets [and] retain over $925 million in cash if adopted for all of 2009," there is a great deal of irritation over the firm's arrogance and lack of concern for shareholders.

The REIT will be selling 15 million shares in the company at a price of $31.50 per share in a new offering. The company will be using the proceeds to pay down debt and to cover other operating costs. Simon also announced the completion of the offering of $650 million in new senior debt with a maturity of 2019. The 10-year notes were priced to yield 10.75%.

As the largest public real estate company in the country, Simon Property owns and manages 250 malls in 37 states and Canada. Simon is one of the largest landlords for small retailers as well as major department stores.

In the current environment, investors will be watching the pace of the closings of these small retailers and the threats facing the larger department stores as a result of the retail meltdown. Revenues of Simon are likely to be stressed from this environment.

Louis Navellier's PortfolioGrader Pro, which rates Wall Street stocks, rates SPG a D or Sell.

Jamie Dlugosch is a contributor to InvestorPlace.com.