A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Sabine Royalty Trust (NYSE:SBR) has returned an average of 7.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Sabine Royalty Trust should have a place in your portfolio. See our latest analysis for Sabine Royalty Trust
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Sabine Royalty Trust pass our checks?The current payout ratio for SBR is 103.58%, 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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. SBR investors will be well aware there has not been any increase in the dividend payments over the last 10 years, although the payments have at least been steady. However, income investors that value stability over growth may still find SBR appealing. Compared to its peers, Sabine Royalty Trust has a yield of 5.69%, which is high for oil and gas stocks.
If you are building an income portfolio, then Sabine Royalty Trust is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should look at:
1. Valuation: What is SBR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SBR is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Sabine Royalty Trust’s board and the CEO’s back ground.
3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.