Yahoo Finance Permian Basin Royalty Trust's (NYSE:PBT) Dividend Will Be Increased To US$0.032
The board of Permian Basin Royalty Trust (NYSE:PBT) has announced that it will be increasing its dividend on the 14th of February to US$0.032. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.
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 59% 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. Before making this announcement, Permian Basin Royalty Trust's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
If the company can't turn things around, EPS could fall by 9.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 124%, which could put the dividend in jeopardy if the company's earnings don't improve.
Permian Basin Royalty Trust's Track Record Isn't Great
The dividend hasn't seen any major cuts in the last 10 years, but it has slowly been decreasing. The first annual payment during the last 10 years was US$1.37 in 2012, and the most recent fiscal year payment was US$0.25. This works out to a decline of approximately 82% 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 May Be Hard To Come By
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Permian Basin Royalty Trust's earnings per share has shrunk at approximately 9.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On Permian Basin Royalty Trust's Dividend
Overall, we always like to see the dividend being raised, but we don't think Permian Basin Royalty Trust will make a great income stock. 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. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Permian Basin Royalty Trust has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
