9.2%-Yielding Cross Timbers Royalty Stock Up 95% in 2022
October 13, 2022
Investors Should Take a Look at Cross Timbers Royalty Trust
Interest rates continue to go up, inflation is still out of control, and the world is teetering on the brink of a global recession. Despite these macroeconomic headwinds, some stocks have kept rising.
For instance, shares of Cross Timbers Royalty Trust (NYSE:CRT) are up by 95% year-to-date and 60% year-over-year. Not only has CRT stock been on a tear this year, but its year-to-date dividends are already 35% higher than in all of 2021. By all accounts, 2022 has been a banner year for Cross Timbers Royalty stock.
Cross Timbers Royalty holds 90% of the net profit interests in certain royalty and overriding-royalty properties in Texas, Oklahoma, and New Mexico. The trust also holds 75% of the net profit interests in certain working-interest properties in Texas and Oklahoma. The 75% net profit interests in Texas and Oklahoma are conveyed from underlying working interests in seven large, predominantly oil-producing properties. (Source: “About Us,” Cross Timbers Royalty Trust, last accessed October 11, 2022.)
The underlying properties from which Cross Timbers Royalty conveyed its net profit interests are owned by XTO Energy Inc. Most of Cross Timbers Royalty Trust’s net profit income comes from long-lived natural gas properties in the San Juan Basin of northwestern New Mexico.
Net profit interests are the trust’s only assets, other than cash held for expenses and distributions to unitholders. Cross Timbers Royalty’s net profit income is reduced by production and development costs. Since the company’s 90% net profit interests aren’t subject to production or development costs, its income generally only varies due to changes in sales volume or commodity price.
CRT Stock’s Year-to-Date Distributions Up 91% Year-Over-Year
Unlike some energy companies, Cross Timbers Royalty Trust doesn’t plow money into developing new wells. Instead, it pays out virtually all of its earnings to its stockholders. That’s why Cross Timbers Royalty stock investors are on the receiving end of high-yield monthly dividends.
In mid-September, the company announced a cash distribution of $0.200401 per unit, payable on October 17 to unitholders of record as of September 30. This works out to an inflation-crushing yield of 9.2%. (Source: “Cross Timbers Royalty Trust Declares September Cash Distribution,” Cross Timbers Royalty Trust, September 20, 2022.)
In the first nine months of 2022, CRT stock paid out a total of $1.50 per unit. This represents a 91% increase over the $0.78 per unit it paid out in the same period of 2021. It also represents a 35% increase over the $1.11 it paid out in all of 2021.
As an energy company, Cross Timbers Royalty pays a monthly distribution that fluctuates based on the amount of oil and natural gas it drills—and the prices it realizes for that oil and gas. Right now, Cross Timbers Royalty Trust is in a sweet spot. In September, the company sold 13,000 barrels of oil at an average price of $104.88 per barrel, as well as 107,000 thousand cubic feet (MCF) of natural gas at an average price of $9.55 per MCF.
In August, the average price of a barrel of oil was $108.03 and the average price of natural gas per MCF was $9.42. Cross Timbers Royalty stock’s August distribution was $0.23 per unit.
Although CRT stock’s payout amount ebbs and flows with energy prices and where we are in the economic cycle, the payout level been going up steadily since 2020.
|
Year |
Dividend Per Share |
|
2022 Year-to-Date |
$1.50 |
| 2021 |
$1.11 |
|
2020 |
$0.77 |
| 2019 |
$0.87 |
|
2018 |
$1.42 |
| 2017 |
$1.00 |
|
2016 |
$1.06 |
| 2015 |
$1.35 |
|
2014 |
$2.65 |
| 2013 |
$2.31 |
|
2012 |
$2.48 |
| 2011 |
$2.99 |
|
2010 |
$2.78 |
|
2009 |
$1.88 |
| 2008 |
$5.15 |
(Source: “Cash Distributions,” Cross Timbers Royalty Trust, last accessed October 11, 2022.)
Cross Timbers Royalty is able to substantially increase its monthly distributions because it makes a lot of money. In the second quarter ended June 30, its net profit income was $3.8 million, a 110% increase over the $1.8 million in the second quarter of 2021. The big increase was primarily the result of increased natural gas production ($1.9 million) and increased oil and gas prices ($1.6 million). (Source: “Cross Timbers Royalty Trust 2nd Quarter Report 2022,” Cross Timbers Royalty Trust, last accessed October 11, 2022.)
The trust’s distributable income in the second quarter of 2022 was $3.6 million, or $0.59 per unit. In the second quarter of 2021, its distributable income was $1.7 million, or $0.27 per unit. Since Cross Timbers Royalty pays out all of its earnings to its unitholders, the company’s payout ratio is 1:1.
Cross Timbers Royalty Stock’s Price Performance
As you can see in the chart below, things have been going exceptionally well for Cross Timbers Royalty stock in terms of price, which is, as of this writing, up by:
- 40% over the last three months
- 66% over the last six months
- 95% year-to-date
- 60% year-over-year
In comparison, the S&P 500 is down by:
- Four percent over the last three months
- 20% over the last six months
- 23% year-to-date
- 16% year-over-year
Chart courtesy of StockCharts.com
The Lowdown on Cross Timbers Royalty Trust
Cross Timbers Royalty Trust is a great oil and gas exploration company that has been running on all cylinders.
While its current run won’t last forever, the company’s outlook is robust, which bodes well for CRT stock’s price and monthly high-yield dividends.
