A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Sabine Royalty Trust (NYSE:SBR) has been paying a dividend to shareholders. Today it yields 6.1%. Let’s dig deeper into whether Sabine Royalty Trust should have a place in your portfolio.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Sabine Royalty Trust pass our checks?
The company currently pays out 95.4% of its earnings as a dividend, according to its trailing twelve-month data, 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.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality facing SBR investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Relative to peers, Sabine Royalty Trust generates a yield of 6.1%, which is high for Oil and Gas stocks.
Whilst there are few things you may like about Sabine Royalty Trust from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SBR’s future growth? Take a look at our free research report of analyst consensus for SBR’s outlook.
- 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.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.