Monthly Dividend Stock In Focus: SL Green Realty Corp

Updated on April 1st, 2025 by Nathan Parsh

Many investors find high-yielding stocks appealing because of the income they produce. This is why Real Estate Investment Trusts, or REITs, are so popular among dividend growth investors. REITs are required to pass along the majority of their income in the form of dividends.

SL Green Realty Corp (SLG) is a good example of a high-yielding REIT. The stock currently pays a 5.3% yield and pays a monthly dividend. There are currently fewer than 80 monthly dividend stocks.

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The currently high dividend yield offers a substantial boost to expected total returns, making SLG an appealing investment option for income investors.

This article will analyze the investment prospects of SL Green in further detail.

Business Overview

SL Green Realty is an integrated that is focused on acquiring, managing, and maximizing the value of Manhattan commercial properties. It is Manhattan’s largest office landlord, with a market capitalization of $4.2 billion, and currently owns 54 buildings totaling 31 million square feet.

On January 23rd, 2025, SLG reported financial results for the fourth quarter of fiscal year 2024.

Nevertheless, due to a large gain ($0.36 per share) from debt extinguishment, funds from operations (FFO) per share more than doubled over the prior year’s quarter, from a depressed level of $0.72 to $1.81. This beat analysts’ estimates by $0.34. That said, its same-store net operating income dropped 2.7% over the prior year’s quarter.

The pandemic severely hit SLG, which has led many tenants to adopt a work-from-home model.

Office space occupancy in New York remains near historic lows, creating an unprecedented tenant-friendly environment. The exceptionally high FFO per share of $8.11 in 2024 resulted from some non-recurring gains. We project that FFO will decline significantly to $5.40 in 2025.

The trust’s occupancy rate edged up sequentially from 90.1% to 92.5% in Q4. Overall, occupancy rates are well below their pre-pandemic high.

Source: Investor Presentation

Office REITs have been hit especially hard in this environment as employees are working more from home relative to pre-pandemic levels, which has hurt demand for office REITs. This will be something investors will want to monitor as higher occupancy rates generally lead to improved fundamentals.

Growth Prospects

SLG benefits from long-term rental rate growth in Manhattan, one of the most popular commercial areas in the world. The REIT pursues growth by acquiring attractive properties and raising rental rates in its existing properties.

It also signs multi-year contracts (7-15 years) with its tenants to secure reliable cash flows. However, due to the ongoing downturn in the office REIT industry, SLG has seen its funds from operations per share grow at just 2.7% over the last decade.

Due to the pandemic’s impact on its business, the REIT’s funds from operations decreased in the three years prior to 2024. The pandemic has subsided, but the REIT has not begun to recover from the work-from-home trend yet.

Due to a high comparison base formed by the non-recurring gain from debt extinguishment this year, we expect FFO per share to increase at an annual rate of just 1% over the next five years.

Dividend and Valuation Analysis

SLG pays dividends monthly. At a current monthly rate of $0.2575 per share, SL Green has an annualized dividend payout of $3.09 per share, representing a 5.3% current yield.

While the dividend has been reduced recently, it looks sustainable at the current level, even considering interest rate headwinds and the still ongoing headwinds from increased working from home for this office REIT.

We expect SL Green to produce $5.40 of funds from operations per share in 2025, giving the stock a projected dividend payout ratio of 57% for the year. This is a relatively low payout ratio for a REIT. The trust has seemed to manage its business well, and management is experienced.

SLG has a decent balance sheet and a healthy BBB credit rating. It can also maintain its 5%+ dividend, which is well covered by cash flows. Thus, SLG is suitable for income-oriented investors who can patiently wait for the REIT’s recovery from the pandemic.

On the other hand, we note that SLG issued a large amount of debt to buy new properties last year and carries $4.2 billion of long-term debt on its balance sheet, which is more than 100% of the stock’s current market capitalization. We will continue to monitor the debt situation closely.

Final Thoughts

SL Green is a high-yielding REIT that is facing headwinds to its business. The COVID-19 pandemic caused increased working from home, which remains a headwind for Manhattan office occupancy rates.

On the other hand, SL Green also has some long-term growth potential given that it is concentrated in a high-demand area of New York City and since it continues to upgrade its portfolio over time via regular transactions.

The high dividend yield could allow for highly compelling total returns going forward. However, SL Green can’t be described as an especially low-risk stock due to the aforementioned headwinds for its business.

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