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PermRock Royalty Trust (NYSE:PRT) Has Announced That It Will Be Increasing Its Dividend To $0.092

The board of PermRock Royalty Trust (NYSE:PRT) has announced that it will be paying its dividend of $0.092 on the 15th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 8.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for PermRock Royalty Trust

PermRock Royalty Trust's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, PermRock Royalty Trust's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, could fall by 8.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 86%, which is definitely on the higher side.

historic-dividend
historic-dividend

PermRock Royalty Trust's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of $1.55 in 2018 to the most recent total annual payment of $0.79. This works out to a decline of approximately 49% 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

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though PermRock Royalty Trust's EPS has declined at around 8.3% 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.

PermRock Royalty Trust's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think PermRock Royalty Trust is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for PermRock Royalty Trust (of which 1 makes us a bit uncomfortable!) you should know about. Is PermRock Royalty Trust not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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