Yahoo Finance Permian Basin Royalty Trust (NYSE:PBT) Is Increasing Its Dividend To US$0.025
The board of Permian Basin Royalty Trust (NYSE:PBT) has announced that the dividend on 14th of January will be increased to US$0.025, which will be 84% higher than last year. Despite this raise, the dividend yield of 2.5% is only a modest boost to shareholder returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Permian Basin Royalty Trust's stock price has increased by 71% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Permian Basin Royalty Trust
Permian Basin Royalty Trust Doesn't Earn Enough To Cover Its Payments
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Permian Basin Royalty Trust's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
If the company can't turn things around, EPS could fall by 9.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 112%, which could put the dividend under pressure if earnings don't start to improve.
Permian Basin Royalty Trust's Track Record Isn't Great
While the company's dividend hasn't been very volatile, it has been decreasing over time, which isn't ideal. Since 2011, the first annual payment was US$1.39, compared to the most recent full-year payment of US$0.23. Dividend payments have fallen sharply, down 83% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Is Doubtful
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Permian Basin Royalty Trust's EPS has declined at around 9.1% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
Our Thoughts On Permian Basin Royalty Trust's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Permian Basin Royalty Trust's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Permian Basin Royalty Trust (1 can't be ignored!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
