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Cross Timbers Royalty Trust (NYSE:CRT) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 28th of January, you won't be eligible to receive this dividend, when it is paid on the 12th of February.
Cross Timbers Royalty Trust's next dividend payment will be US$0.049 per share. Last year, in total, the company distributed US$0.81 to shareholders. Based on the last year's worth of payments, Cross Timbers Royalty Trust has a trailing yield of 8.7% on the current stock price of $8.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Cross Timbers Royalty Trust paid out 100% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Cross Timbers Royalty Trust's earnings per share have fallen at approximately 21% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cross Timbers Royalty Trust's dividend payments per share have declined at 11% per year on average over the past 10 years, which is uninspiring. 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.
To Sum It Up
Is Cross Timbers Royalty Trust worth buying for its dividend? Earnings per share are in decline and Cross Timbers Royalty Trust is paying out what we feel is an uncomfortably 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 Cross Timbers Royalty Trust. To that end, you should learn about the 4 warning signs we've spotted with Cross Timbers Royalty Trust (including 1 which is significant).
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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