Yahoo Finance North European Oil Royalty Trust (NYSE:NRT) Is Increasing Its Dividend To $0.74
The board of North European Oil Royalty Trust (NYSE:NRT) has announced that it will be paying its dividend of $0.74 on the 30th of November, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.
Check out our latest analysis for North European Oil Royalty Trust
North European Oil Royalty Trust Is Paying Out More Than It Is Earning
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. 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. 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 13.6% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 122% over the next year.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from $2.64 total annually to $0.63. The dividend has fallen 76% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Could Be Constrained
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. North European Oil Royalty Trust has seen EPS rising for the last five years, at 14% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think North European Oil Royalty Trust's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think North European Oil Royalty Trust is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for North European Oil Royalty Trust (1 makes us a bit uncomfortable!) 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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