PS Business (PSB) Rewards Investors With Special Dividend

·4 min read

PS Business Parks, Inc.’s PSB board of directors recently announced a special dividend of $4.60 per share of common stock. The amount will be paid out on Dec 30, 2021 to its stockholders of record as of Dec 15. The special dividend will be paid out together with the quarterly dividend of $1.05 per share of common stock.

Special dividends are paid by the real-estate investment trusts (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 PS Business Parks too, the special dividend comes as a result of divestitures. These includes a 371,000-square-foot industrial-flex business park in San Diego, CA, an office business park of 244,000 square foot in Herndon, VA and 198,000 square foot office-oriented business park located in Chantilly, VA, a 22,000-square-foot industrial-flex building in Irving, TX and an expected sale of a 53,000-square-foot office building in Beltsville, MD, which is expected to close this year. Based on estimated 2021 net operating income from the assets sold, the total sale cap rate of the 2021 dispositions was roughly 2.3%.

PS Business Parks estimated its 2021 REIT taxable income long-term capital gain after considering the assets acquired which qualify as Section 1031 exchanges. The buyout efforts included the acquisitions of Port America Industrial Park in Grapevine, TXand Jupiter Business Park in Plano, TX in September and November, respectively. Based on the underwritten 2022 net operating income from the acquired properties, the combined cap rate of the 2021 acquisitions was 3.8%.

Per management, "In 2021, we continued to execute on our strategy to unlock value in our portfolio and increase our long-term earnings growth rate."

As investors prefer an income-generating stock, solid dividend payouts are the biggest enticement for REIT investors. Given its solid capital and liquidity position, PS Business Parks is anticipated to continue enhancing its shareholder value through an efficient capital-deployment activity.

PS Business Parks has ample financial flexibility to cushion and elevate its market position. PSB exited the third quarter of 2021 with cash and cash equivalents of $46.6 million. It has low leverage relative to its total capitalization and operating cash flows, and a strong credit profile. In the absence of large-debt maturities, PSB is well poised to navigate the current situation and seize accretive growth opportunities.

However, rising supply in several markets might intensify competition. With the REIT’s portfolio comprising small- and mid-size customers that are more susceptible to the pandemic’s adverse impact, rent deferrals and customer defaults might prevail in the near term.

PS Business Parks currently carries a Zacks Rank #4 (Sell). The stock has gained 9.6% compared with the industry’s rally of 2.6% over the past six months.

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You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Some better-ranked stocks from the REIT sector are OUTFRONT Media OUT, Cedar Realty Trust CDR and Apple Hospitality REIT APLE.

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 funds from operations (FFO) per share has been raised 13.8% over the past month. OUT flaunts a Zacks Rank #1 (Strong Buy), currently.

Over the last four quarters, OUTFRONT Media’s FFO per share surpassed the consensus estimate thrice and reported in-line results once, the average surprise being 44.87%. Shares of OUT have inched up 2.8% in the past six months, against the industry’s decline of 2.6%.

The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has been raised 2.6% in the past month. CDR currently sports a Zacks Rank of 1.

Over the last four quarters, Cedar Realty’s FFO per share surpassed the consensus estimate on two occasions and missed the mark on the remaining two, the average surprise being 6.40%. Shares of CDR have appreciated 47.1% in the past six months, outperforming the industry’s rally of 2.6%.

The Zacks Consensus Estimate for Apple Hospitality REIT’s 2021 FFO per share has moved 4.9% north in the past month. APLE currently carries a Zacks Rank #2 (Buy).

Over the last four quarters, Apple Hospitality’s FFO per share surpassed the consensus mark thrice and missed the same once, the average negative surprise being 14.2%. Shares of APLE have declined 1.6% in the past three months compared with the industry’s fall of 2.6%.

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.

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PS Business Parks, Inc. (PSB) : Free Stock Analysis Report

Cedar Realty Trust, Inc. (CDR) : Free Stock Analysis Report

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Apple Hospitality REIT, Inc. (APLE) : Free Stock Analysis Report

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