Investing in the stock market allows investors to explore a wide range of opportunities, from large-cap stocks to small-cap and micro-cap stocks. While large-cap stocks have market capitalizations of $10 billion or more, small-caps fall below $2 billion. On the other end of the spectrum, micro-cap stocks like Cross Timbers Royalty Trust (CRT) have market capitalizations of $300 million or less, making them tiny players in the market with unique characteristics.
Here are some key points to consider about Cross Timbers and its investment potential:
- High Dividend Yield: Despite its minuscule market capitalization of $54 million, Cross Timbers offers a generous dividend yield of 7.3%, making it an attractive option for income-seeking investors.
- Monthly Dividend Payouts: Cross Timbers stands out by offering monthly dividend payments, providing investors with a consistent income stream.
- Uncertain Outlook: However, Cross Timbers has a risky business model, as evidenced by the fluctuation in its annual dividend payouts from 2014 to 2020. This uncertainty means that only investors comfortable with risk should consider investing in Cross Timbers.
Business Overview:
Cross Timbers Royalty Trust, established in 1991, generates income from net profits interest in oil and gas-producing properties in Texas, Oklahoma, and New Mexico. The trust distributes this income to unitholders, with XTO Energy making the payment. The trust’s income is impacted by production costs, commodity prices, and sales volumes, making it sensitive to market conditions.
Growth Prospects:
The trust’s growth prospects hinge on oil and gas prices, with commodity prices influencing its distributable income and share price. As the trust operates with minimal expenses, its distributable income is tied to revenue, making oil and gas prices vital for its growth potential.
Dividend Analysis:
Cross Timbers offers a high dividend yield, driven by its royalty income distribution. However, the trust’s distributions are subject to oil and gas price fluctuations, posing risks for investors. The trust’s future growth relies on commodity prices, making it a speculative play for income-seeking investors.
In conclusion, Cross Timbers presents a unique opportunity for investors seeking exposure to the oil and gas sector while enjoying monthly income. However, the trust’s reliance on commodity prices and its unpredictable dividend payouts make it a risky investment. Investors should carefully consider the risks associated with royalty trusts and micro-cap stocks before adding Cross Timbers to their portfolio.
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