Yahoo Finance We Wouldn't Be Too Quick To Buy Sabine Royalty Trust (NYSE:SBR) Before It Goes Ex-Dividend
Readers hoping to buy Sabine Royalty Trust (NYSE:SBR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 14th of September in order to receive the dividend, which the company will pay on the 29th of September.
Sabine Royalty Trust's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$2.81 to shareholders. Looking at the last 12 months of distributions, Sabine Royalty Trust has a trailing yield of approximately 8.8% on its current stock price of $30.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Sabine Royalty Trust
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Sabine Royalty Trust paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Click here to see how much of its profit Sabine Royalty Trust paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Sabine Royalty Trust's 6.9% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sabine Royalty Trust's dividend payments per share have declined at 1.0% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Is Sabine Royalty Trust worth buying for its dividend? Earnings per share are in decline and Sabine Royalty Trust is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you're still considering Sabine Royalty Trust as an investment, you'll find it beneficial to know what risks this stock is facing. For example - Sabine Royalty Trust has 1 warning sign we think you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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