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SL Green (SLG) Hikes Dividend, Announces Special Dividend

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SL Green Realty Corp. (SLG - Free Report) has announced a 2.8% hike in its annual ordinary dividend to $3.64 per share. The company will now pay a monthly dividend of 30.33 cents per share, up from the 29.5 cents paid in the prior month.

The increased dividend will be paid on Jan 15, 2021, to shareholders of record as on Dec 15, 2020, i.e. the record date. Based on the increased rate, the annual dividend comes to $3.54 a share, resulting in an annualized yield of 5.7%, considering SL Green’s closing price of $63.90 on Dec 4.

In addition to the quarterly dividend, SL Green has also announced a special dividend with a value of $1.6967 per share, payable on Jan 15, 2021, to shareholders of record as of the record date. However, this special dividend will be paid in common stock, with the number of shares being calculated based on the volume weighted average trading price of the company’s common stock between Jan 5-7, 2021.

Usually, special dividends are paid by REITs on capital gains from the sale of assets to avoid paying taxes. Notably, the U.S. law requires these companies to distribute at least 90% of their taxable income to shareholders, annually, in the form of dividends.

For SL Green too, the special dividend comes as a result of asset dispositions in 2020, including the previously-announced sale of 410 Tenth Avenue. Nevertheless, the board of directors also authorized a reverse stock split, effective Jan 20, 2021, in order to mitigate the dilutive impact of the stock issued in the special dividend. After the close of business on Jan 7, the split ratio for the same will be determined.

Per management, "All of us at SL Green have worked tirelessly to navigate the unprecedented challenges of the pandemic. As a result of these efforts, we are now in a position to not only increase our ordinary dividend, but to also issue a special dividend.”

Markedly, as investors prefer an income-generating stock, solid dividend payouts are the biggest enticement for real estate investment trust (REIT) investors. In fact, SL Green has hiked dividends consistently over the years.

SL Green has a robust balance sheet and ample financial flexibility and exited third-quarter 2020 with $1.56 billion of liquidity. In the past few quarters, it has taken proactive steps to bolster its liquidity on the back of financing, refinancing, sales and repayment of existing positions in the debt and preferred equity (DPE) portfolio, and the sale of real estate assets and joint-venture stake. Such prudent steps boost SL Green’s ability to withstand the current crisis and any future unexpected negative externalities. Also, the company has a manageable debt-maturity schedule. With a number of creditworthy tenants in its roster, the company is well poised to enjoy stable revenues and reward shareholders accordingly.

SL Green currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 35.8% compared with the industry’s rally of 4.3% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Extra Space Storage Inc.’s (EXR - Free Report) Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has moved up marginally to $5.03 over the past week. The company currently sports a Zacks Rank of 1.

Innovative Industrial Properties, Inc.’s (IIPR - Free Report) FFO per share estimate for the current year has been revised upward by 2.6% to $5.11 over the past month. The company carries a Zacks Rank of 2 (Buy), currently.

City Office REIT, Inc.’s (CIO - Free Report) Zacks Consensus Estimate for ongoing-year FFO per share has improved 5.3% to $1.20 in a month’s time. The company holds a Zacks Rank of 2 at present.

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

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