Attention dividend hunters! Hugoton Royalty Trust (NYSE:HGT) will be distributing its dividend of $0.01 per share on the 16 January 2018, and will start trading ex-dividend in 2 days time on the 28 December 2017. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Hugoton Royalty Trust’s most recent financial data to examine its dividend characteristics in more detail. See our latest analysis for Hugoton Royalty Trust
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Hugoton Royalty Trust fit our criteria?
The current payout ratio for HGT is 100.00%, which means that the dividend is not well-covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Hugoton Royalty Trust fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Relative to peers, Hugoton Royalty Trust produces a yield of 8.53%, which is high for oil and gas stocks.
What this means for you:
Are you a shareholder? You may be wondering why Hugoton Royalty Trust is paying out dividends at all, instead of re-investing into the business to generate higher cash flows in the future. It may be beneficial exploring other income stocks as alternatives to Hugoton Royalty Trust or even look at high-growth stocks to supplement your steady income stocks. I suggest continuing your research by taking a look at my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? Now you know to keep in mind the reason why investors should be careful investing in Hugoton Royalty Trust for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. I also recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Check our latest free fundmental analysis to explore other aspects of Hugoton Royalty Trust.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.