Yahoo Finance North European Oil Royalty Trust (NYSE:NRT) Has Announced That It Will Be Increasing Its Dividend To $0.46
North European Oil Royalty Trust's (NYSE:NRT) dividend will be increasing from last year's payment of the same period to $0.46 on 31st of August. This takes the annual payment to 4.0% of the current stock price, which is about average for the industry.
View our latest analysis for North European Oil Royalty Trust
North European Oil Royalty Trust Is Paying Out More Than It Is Earning
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, North European Oil Royalty Trust's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Earnings per share could rise by 8.7% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 108%, which probably can't continue without starting to put some pressure on the balance sheet.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $2.63 in 2012, and the most recent fiscal year payment was $0.63. The dividend has fallen 76% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
There Isn't Much Room To Grow The Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. North European Oil Royalty Trust has seen EPS rising for the last five years, at 8.7% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.
In Summary
Overall, we always like to see the dividend being raised, but we don't think North European Oil Royalty Trust will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for North European Oil Royalty Trust (1 doesn't sit too well with us!) that you should be aware of before investing. 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.
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