Why You Should Not Buy Pacific Coast Oil Trust (NYSE:ROYT) For Dividend

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 6 years, Pacific Coast Oil Trust (NYSE:ROYT) has returned an average of 9.00% per year to shareholders in terms of dividend yield. Does Pacific Coast Oil Trust tick all the boxes of a great dividend stock? Below, I'll take you through my analysis. See our latest analysis for Pacific Coast Oil Trust

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?
• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
• Has dividend per share risen in the past couple of years?
• Is is able to pay the current rate of dividends from its earnings?
• Will it have the ability to keep paying its dividends going forward?

Does Pacific Coast Oil Trust pass our checks?

The current trailing twelve-month payout ratio for ROYT 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 there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Unfortunately, it is really too early to view Pacific Coast Oil Trust as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Pacific Coast Oil Trust generates a yield of 5.53%, which is high for Oil and Gas stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Pacific Coast Oil 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. 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 relevant aspects you should look at:

1. Valuation: What is ROYT 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 ROYT 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 Pacific Coast Oil 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.