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.