PermRock Royalty Trust (NYSE:PRT) increases its dividend to $0.092

PermRock Royalty Trust (NYSE:PRT) will increase its dividend from last year’s comparable payout on Sept. 15 to $0.092. This brings the dividend yield to 8.8%, which is above the industry average.

See our latest review for PermRock Royalty Trust

PermRock Royalty Trust payout has strong revenue coverage

If the payouts aren’t sustainable, a high return for a few years won’t matter much. Prior to making the announcement, PermRock Royalty Trust’s dividend was higher than its earnings, but free cash flow covered it quite comfortably. Since the dividend is a cash outflow, we believe cash is more important than accounting measures of earnings when evaluating the dividend, so this is a mitigating factor.

EPS is expected to fall 8.3% over the next 12 months if recent trends continue. However, if the dividend continues according to recent trends, we estimate that the payout ratio could reach 86%, which means that the majority of the company’s profits are paid to shareholders.

NYSE: Historic PRT Dividend August 22, 2022

PermRock Royalty Trust’s dividend lacks consistency

Even in its short history, we have seen the dividend reduced. As of 2018, the annual payment at the time was $1.55, compared to the most recent annual payment of $0.79. Dividend payouts have fallen sharply, down 49% over this period. A company that decreases its dividend over time is generally not what we are looking for.

Dividend growth is questionable

Dividends are going in the wrong direction, so we want to see a different trend in earnings per share. Over the past five years, PermRock Royalty Trust’s EPS appears to have declined by approximately 8.3% per year. A slight decline in earnings is not great, and it is unlikely that the dividend will increase in the future unless this trend can be reversed.

PermRock Royalty Trust dividend does not appear to be sustainable

Overall, we still like to see the dividend increase, but we don’t think PermRock Royalty Trust will make a great income stock. Payouts haven’t been particularly steady and we don’t see huge upside potential, but with the dividend well covered by cash flow, it could prove reliable in the short term. We don’t think PermRock Royalty Trust is a great stock to add to your portfolio if income is your priority.

Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. However, there are other things for investors to consider when analyzing stock performance. Example: we have identified 2 warning signs for PermRock Royalty Trust (of which 1 does not suit us too much!) that you should know. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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