Why Is SL Green's Dividend So High?
SL Green Realty (NYSE: SLG) is a real estate investment trust (REIT), a corporate structure designed to invest properties and to pass on most of its taxable income to shareholders. That it would have a high yield is hardly surprising.
But at 13.5%, the dividend yield for the office-space REIT is worryingly elevated. Here's what's going on and why investors might want to tread with caution.
Even in good times, it is expensive to operate a portfolio of offices. Historically speaking, office REITs have had modest payout ratios because of this. As an example, every time a tenant vacates a space, landlords like SL Green have to look for a new tenant and (here's the expensive part) provide improvements to the location to get the new tenant in the door.
Source Fool.com
