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PermRock Royalty: For a Lifetime of Income

12/17/2018 5:00 am EST

Focus: MLPS

Tim Plaehn

Investment Research Analyst, Investors Alley

I am recommending PermRock Royalty Trust (PRT); the company announced a monthly dividend of 6.74 cents per share. This is down about 40% from last month’s distribution of 11.59 cents per share, asserts Tim Plaehn, editor of Dividend Hunter Insiders.

The lower payout should not be a surprise based on what crude oil did in October and the further discounts for Permian oil — the source of PRT’s revenue. I have noted several times that the PRT monthly dividend will vary with the price of oil.

We will again in the future earn 11 cent, 12 cent, and much larger monthly dividends. The recent share price drop makes PRT an attractive add. As a result, I added to my PRT holding.

I view my this investment as a purchase into a lifetime (well at least 75 years) income stream based on what happens with the price of oil. I plan to build on my position over time and am happy to buy more when the price goes down.

I do not expect to ever sell any PRT units. This means I don’t have much of a care about the share price. OK, if oil again goes to $140 a barrel and PRT goes to $100, I might sell some to lock in a profit.

The global crude oil market remains headed for a supply shortage. There is no way for the oil producers to overcome the last four years of under investment in future production.

At the same time global demand continues to grow by 1.5% or so per year. That growth equates to adding 1.5 million barrels per day, with that amount of increase coming every year.

The reason President Trump gave waivers to Iranian oil buyers is that there is not enough supply in the world without the oil produced by Iran. Think about that.

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