Cross Timbers Royalty Trust (NYSE:CRT) Is Increasing Its Dividend To US$0.16

Cross Timbers Royalty Trust (NYSE:CRT) has announced that it will be increasing its dividend on the 13th of May to US$0.16. This will take the dividend yield from 8.1% to 8.5%, providing a nice boost to shareholder returns.

See our latest analysis for Cross Timbers Royalty Trust

Cross Timbers Royalty Trust Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 100% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only . Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to grow by 1.0% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 104%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was US$2.68, compared to the most recent full-year payment of US$1.22. This works out to be a decline of approximately 7.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Cross Timbers Royalty Trust May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Cross Timbers Royalty Trust's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The earnings growth is anaemic, and the company is paying out 100% of its profit. This gives limited room for the company to raise the dividend in the future.

Our Thoughts On Cross Timbers Royalty Trust's Dividend

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Cross Timbers Royalty Trust has 3 warning signs (and 1 which is potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.