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SL Green Realty (SLG) Hikes Dividend, Grants Special Dividend

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SL Green Realty Corp.’s (SLG - Free Report) board of directors has announced a 2.5% hike in its annual ordinary dividend, which will now total$3.73 per share. SLG will now pay out a monthly dividend of 31.08 cents per share, up from 30.3 cents paid in the prior month.

The increased dividend will be paid out on Jan 18, 2021, to its shareholders of record as of Dec 15, 2021. Based on the increased rate, the annual dividend comes to $3.73 a share, resulting in an annualized yield of 5.24%, considering SL Green’s closing price of $71.23 on Dec 4.

In addition to the raise in annual ordinary dividend, SL Green announced a special dividend of $2.4392 per share, payable Jan 18, 2022, to its shareholders of record as of Dec 15. However, this special dividend will be paid out in common stock, with the number of shares calculated on the volume-weighted average trading price of SLG’s common stock on the New York Stock Exchange between Jan 5 and Jan 7, 2022.

The stockholders will therefore receive a total dividend of $2.75 per share, comprising the sum of the monthly ordinary dividend and the special dividend.

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

For SL Green too, the special dividend comes as a result of the extraordinary gains on asset dispositions in 2021. However, the board of directors authorized a reverse stock split effective Jan 21, 2022, to mitigate the dilutive impact of the SLG common stock issued in the special dividend. The split ratio for the same will be determined after the close of business on Jan 10.

As investors prefer an income-generating stock, solid dividend payouts are the biggest enticement for real-estate investment trust (REIT) investors. SL Green remains committed to this.

Per SL Green management, "New York City is in the midst of a broad and palpable recovery and we are very proud that our performance has provided us the opportunity to increase our ordinary dividend for the eleventh year in a row, while issuing another sizable special dividend.”

SL Green has ample financial flexibility and exited third-quarter 2021 with cash and cash equivalents of $257.9 million. Over the last few quarters, it made efforts to bolster its liquidity on the back of financing, refinancing, sales and repayment of the existing positions in the debt and preferred equity portfolio, and the sale of real-estate assets and joint-venture stakes. Such prudent steps boost SL Green’s ability to withstand the current crisis and any unexpected negative externalities in the future.

SL Green currently carries a Zacks Rank #3 (Hold). The stock has gained 1.5% against the industry’s decline of 5.5% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some key picks from the REIT sector are OUTFRONT Media (OUT - Free Report) , Cedar Realty Trust (CDR - Free Report) and Apple Hospitality REIT (APLE - Free Report) .

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 FFO per share has been raised 13.8% over the past month. OUT’s 2021 FFO per share is expected to increase 45.71% from the year-ago reported figure.

OUTFRONT flaunts a Zacks Rank of 1 (Strong Buy) at present. Shares of OUT have rallied 8.6% in the past six months.

The Zacks Consensus Estimate for Cedar Realty’s current-year FFO per share has been raised 2.6%  to $2.36 in the past month. This suggest an increase of 16.9% from the year-ago reported figure.

Currently, CDR sports a Zacks Rank of 1.Shares of Cedar Realty have appreciated 48.4% in the past six months.

Apple Hospitality carries a Zacks Rank  #2 (Buy) at present. Over the last four quarters, APLE’s FFO per share surpassed the consensus mark thrice and missed the same once, the average negative surprise being 14.2%.

The Zacks Consensus Estimate for Apple Hospitality’s 2021 FFO per share has been revised 7.1% upward in a month to 91 cents. Shares of APLE have inched up 0.4% in the past three months.

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.