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Cross Timbers Royalty Trust (NYSE:CRT) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 27th of November to receive the dividend, which will be paid on the 14th of December.
Cross Timbers Royalty Trust's upcoming dividend is US$0.052 a share, following on from the last 12 months, when the company distributed a total of US$0.81 per share to shareholders. Based on the last year's worth of payments, Cross Timbers Royalty Trust stock has a trailing yield of around 10.0% on the current share price of $8.03. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Cross Timbers Royalty Trust can afford its dividend, and if the dividend could grow.
View our latest analysis for Cross Timbers Royalty Trust
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year Cross Timbers Royalty Trust paid out 100% 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 Cross Timbers 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Cross Timbers Royalty Trust's earnings per share have fallen at approximately 21% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cross Timbers Royalty Trust has seen its dividend decline 8.2% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
Should investors buy Cross Timbers Royalty Trust for the upcoming dividend? Earnings per share are in decline and Cross Timbers Royalty Trust is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.