Monthly Dividend Stock In Focus: Permian Basin Royalty Trust

Income investors often find high-yielding stocks to be attractive, due to the income that these investments can produce. But sometimes the need for income can blind investors to the issues with the company itself. If this is the case, then investors can be blindsided when the company cuts its dividend.

The same can be said for monthly dividend-paying companies. Investors might overlook weak fundamentals with a company in order to obtain monthly dividend payments. Monthly dividend stocks can be appealing as they create more regular cash flow for investors.

But investors shouldn’t buy a high yield monthly dividend-paying stock simply because of its monthly payments. This is particularly true when it comes to oil and gas royalty trusts.

Permian Basin Royalty Trust (PBT) fits the description of a high yield monthly dividend stock that should be avoided. Even after multiple dividend cuts this year, the stock offers a nearly 6% yield, but this doesn’t make up for a 34% decrease in share price over the last year.

This article will look at Permian Basin’s business, growth prospects and dividend to show why investors should avoid this stock.

Business Overview

Permian Basin holds an overriding royalty interest in several oil and gas properties in the United States. The trust is a small-cap stock that trades with a market capitalization of less than $154 million. The trust has oil and gas producing properties in Texas.

The trust was established in 1980 and has a 75% net profit royalty interest in the Waddell Ranch properties. These properties consist of 332 net productive oil wells, 106 net producing gas wells, and 120 net injection wells.

Permian Basin also holds a 95% net profit royalty interest in the Texas Royalty Properties, which consist of approximately 125 separate royalty interests across 33 counties in Texas covering 51,000 net producing acres.

As of January 1st, 2020, the trust had approximately 4.0 million barrels of proven oil reserves and 5.4 billion cubic feet of proven natural gas reserves remaining. Permian Basin estimates that the trust has a life span of 9 to 11 years remaining.

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Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

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