Monthly Dividend Stock In Focus: PermRock Royalty Trust

Updated on April 18th, 2025 by Felix Martinez

Income investors seeking to invest in oil and gas stocks may want to consider gaining exposure to the booming Permian Basin. PermRock Royalty Trust (PRT) is an oil and gas producer with all of its properties in the Permian Basin, and the stock currently yields nearly 12.1%.

Beyond its high dividend yield, PermRock also pays monthly dividends, rather than the traditional quarterly distribution schedule. Monthly dividend payments are superior for investors who need to budget around their dividend payments (such as retirees).

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PermRock’s double-digit dividend yield instantly appeals to investors. However, as always, investors must understand the underlying business to ensure the dividend payout is sustainable.

This is where oil and gas royalty trusts become especially risky; therefore, only investors with a high risk tolerance should consider purchasing PermRock.

Business Overview

PermRock Royalty Trust is a trust established in November 2017 by Boaz Energy, a company specializing in the acquisition, development, and operation of oil and natural gas properties in the Permian Basin.

The trust owns properties in the Permian Basin. It receives 80% of the net profits from the sale of oil and natural gas produced in its properties and distributes all those net profits in monthly dividends.

According to the EIA, the Permian Basin is the most prolific oil-producing region in the United States. This area spans over 75,000 square miles in West Texas and Southeastern New Mexico. Since its discovery in 1921, it has produced over 30 billion barrels of oil and more than 75 trillion cubic feet (Tcf) of natural gas.

Source: Investor Relations

The properties of the trust have distinct advantages. They consist of long-life reserves in mature, conventional oil fields, characterized by a reliable production profile.

Thanks to the mature nature of these oil fields, production and reserve estimates are highly reliable. This sharply contrasts with the estimates of unconventional fields, which are characterized by a higher degree of uncertainty.

Those reserves are sufficient for approximately 10 years of production at the current production rate. However, the trust can enhance its output through water-flooding techniques, while also discovering new reserves in the area. As a result, management expects the trust to produce oil and natural gas economically for at least 75 years. Such a long reserve life should be sufficient to satisfy even the most demanding investors.

It is also worth noting that remarkably high operating margins characterize the trust’s properties. As the future path of oil prices is highly unpredictable, oil producers must consistently increase their production year after year to sustain long-term earnings.

Growth Prospects

Operating expenses for the quarter were reported at $0.73 million, with capital expenses increasing to $0.71 million, primarily due to drilling activities on a non-operated well in the Permian Shelf. Boaz Energy reserved $826,909 for future capital expenses as of September 30, 2024. These factors, combined with commodity price volatility, continue to impact the Trust’s financial performance and future distributions.

Dividend Analysis

As mentioned above, PermRock Royalty Trust pays a variable monthly dividend depending on its underlying net profits. In 2024, the trust paid a total of $0.42 per share in dividends. Based on this, the stock would have a high dividend yield of 12.1%.

Overall, PermRock Royalty Trust offers an exceptionally high dividend yield. However, investors should keep in mind that dividends may greatly vary from month to month, depending on the underlying oil prices. The extremely weak oil prices of 2019-2020 were a significant challenge for PermRock, which suspended its dividend for five consecutive months in 2020.

Conversely, PermRock Royalty Trust will benefit much more than the larger oil majors if the price of oil rises significantly from its current level. Indeed, the rebound of oil prices from the pandemic has allowed PermRock to resume growing its dividend since last year.

Therefore, the trust is ideal for those who are confident in higher future oil prices and want to gain exposure to the oil boom in the Permian Basin.

In summary, the trust is much more leveraged to the price of oil than the integrated oil companies. Hence, it has much more upside in the positive scenario (higher oil prices) and much more downside in the event of a downturn in the energy sector.

The properties of PermRock are in the Permian Basin, the most prolific oil-producing area in the U.S. However, an oil royalty trust is a poor way to gain exposure to the booming production in this area. We believe investors would be much better off in a traditional oil and gas producer or midstream company. The suspension of the dividend of PermRock for five months in 2020 is a stern reminder of the risk of an oil and gas royalty trust.

Final Thoughts

PermRock Royalty Trust has had a number of challenges in the past few years, including the weak oil price environment and the coronavirus pandemic, which suppressed global oil demand. The trust offers an exceptionally high dividend yield and operates in the most prolific oil-producing area in the U.S., with promising growth prospects.

As we do not expect another downturn in the energy sector in the near term, we believe the trust will offer a consistently high dividend yield. Nevertheless, due to the non-diversified business model of the trust and its dramatic reliance on the price of oil, investors should not allocate a great portion of their portfolio to this stock.

In addition, investors should be aware of the risks associated with investing in such a pure upstream player, as it’s inherently exposed to down side in energy prices.

Moreover, the trust’s short history leaves much to be desired for investors seeking reasonable levels of dividend safety and consistency.

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