Yahoo Finance We Wouldn't Be Too Quick To Buy PermRock Royalty Trust (NYSE:PRT) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that PermRock Royalty Trust (NYSE:PRT) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase PermRock Royalty Trust's shares on or after the 30th of December will not receive the dividend, which will be paid on the 14th of January.
The company's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.47 per share. Calculating the last year's worth of payments shows that PermRock Royalty Trust has a trailing yield of 8.9% on the current share price of $6.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for PermRock Royalty Trust
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PermRock Royalty Trust paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Click here to see how much of its profit PermRock Royalty Trust paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see PermRock Royalty Trust's earnings per share have dropped 18% a year over the past three years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. PermRock Royalty Trust has seen its dividend decline 27% per annum on average over the past three years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
Should investors buy PermRock Royalty Trust for the upcoming dividend? Not only are earnings per share shrinking, but PermRock Royalty Trust is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with PermRock Royalty Trust. For example, we've found 2 warning signs for PermRock Royalty Trust that we recommend you consider before investing in the business.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming 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.
