Is Sabine Royalty Trust (NYSE:SBR) A Great Dividend Stock?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Sabine Royalty Trust (NYSE:SBR) has returned to shareholders over the past 10 years, an average dividend yield of 7.00% annually. Does Sabine Royalty Trust tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Sabine Royalty Trust

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has it increased its dividend per share amount over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

NYSE:SBR Historical Dividend Yield Jun 12th 18

How does Sabine Royalty Trust fare?

The current trailing twelve-month payout ratio for SBR is 102.79%, meaning the dividend is not sufficiently 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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 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. However, income investors that value stability over growth may still find SBR appealing. In terms of its peers, Sabine Royalty Trust produces a yield of 7.41%, which is high for Oil and Gas stocks.

Next Steps:

If Sabine Royalty Trust is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental aspects you should further examine:

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.

To help readers see pass 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.