SL Green Realty stock: The 9.78% dividend yield trap


SL Green Realty (NYSE: SLR) stock price has been in a freefall despite the company’s high dividend yield. It has retreated to a low of $31.55, the lowest level since 2010. This price is about 66% from its highest level on record. 

Worst REIT stock?

SL Green Realty is one of the biggest REITs in the United States. It has a dividend yield of about 9.78%, meaning that there are significant risks of investing the company. The stock has plunged hard amid rising concerns about the commercial real estate industry.

SL Green is the biggest commercial landlord in the US, where it owns 61 buildings with more than 33.1 million square feet. Some of the properties it owns are One Madison Avenue, One Vanderbilt Avenue, 100 Church Street, and 11 Madison Avenue among others.

The commercial real estate industry is in trouble as interest rates surge. Earlier this week, Jerome Powell, the Federal Reserve chair warned that interest rates will need to continue rising in the coming months. He cited the fact that inflation remains sticky.

Therefore, companies of all sizes are cutting costs, with some of the biggest ones like Microsoft and Meta Platforms laying off staff. Recent data also shows that workers at the office are still lower than where they were during the pandemic.

And most recently, companies like Pimco-owned landlord defaulted on a $1.7 billion mortgage. Analysts believe that these defaults will continue, especially in cities like New York and San Francisco. The markets are simply oversupplied in a period when demand is a bit tepid.

The most recent results showed that SL Green is in trouble. The company’s loss came in at $1.01 per share, bigger than the previous net loss of about 82 cents. Funds from operations  (FFO) came in at $1.46, down from $1.47. 

Therefore, I believe that it is always not good to try and catch a falling knife. While the commercial real estate sector will bounce back, my crystal ball believes that the SLG stock price will continue unraveling in the coming months.

SL Green stock price forecast

SLG stock by TradingView

On the daily chart, we see that the SLG share price has been in a steep sell-off in the past few months. It is now sitting at an important support level, which was the lowest point on December 22. The stock has moved below the 50-day and 100-day moving averages. 

A closer look shows that it has formed a double-bottom pattern whose neckline is at $44.22. Therefore, a break below the current level will signal that bears have prevailed. But because of the double-bottom pattern, we cannot rule out a situation where the stock stages a brief relief rally.

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