Cross Timbers Royalty Trust's (NYSE:CRT) Upcoming Dividend Will Be Larger Than Last Year's
The board of Cross Timbers Royalty Trust (NYSE:CRT) has announced that it will be increasing its dividend on the 15th of October to US$0.16. This makes the dividend yield 7.3%, which is above the industry average.
See our latest analysis for Cross Timbers Royalty Trust
Cross Timbers Royalty Trust Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Cross Timbers 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.
EPS is set to fall by 8.6% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 127%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from US$3.05 to US$1.03. The dividend has fallen 66% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
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 Cross Timbers Royalty Trust's EPS has declined at around 8.6% 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.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Cross Timbers Royalty Trust's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Cross Timbers Royalty Trust (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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