Sabine Royalty Trust (SBR) fared relatively well in 2016. It suffered right alongside the other royalty trusts, but Sabine maintained a high dividend payout thanks to the resilience of its quality assets.
Sabine is on the high dividend stocks list thanks to its substantial dividend yield. You can see the full list of established 5%+ yielding stocks by clicking here.
Sabine pays dividends on a monthly schedule, which gives investors the ability to compound their dividends more frequently than the traditional quarterly schedule. There are only 21 stocks that pay monthly dividends. You can see the entire list of monthly dividend payers here.
This article will discuss Sabine’s business model, and why investors anticipating higher oil and gas prices may want to give this royalty trust a closer look.
Business Model
Sabine Royalty Trust was established on December 31, 1982. Its business model is based on income received from its royalty and mineral interests in various oil and gas properties. Sabine is a small-cap stock, with a market capitalization of $557 million. Its oil and gas producing properties are located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas.
The trust has had a long and successful history. When the trust was formed in 1982, reserves were estimated at 9 million barrels of oil and 62 billion cubic feet of gas. At inception, the lifespan of the trust was pegged at 9-10 years. The trust was expected to be fully depleted by 1993.
35 years later, Sabine Royalty Trust is still kicking. In that time, the trust has produced more than 20 million barrels of oil, and over a billion cubic feet of gas. Sabine has paid out approximately $1.279 billion in distributions to unitholders over the course of the past 35 years.
The most recent forecasts are for remaining reserves of 6.0 million barrels of oil, and 35.6 billion cubic feet of gas. If these projections are accurate, the trust would have a remaining lifespan of roughly 8-10 years. The trust does not have a specified end date, but it would terminate if revenue from the royalty properties falls below $2 million per year, in any consecutive two-year period.
