Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Enduro Royalty Trust (NYSE:NDRO) has paid dividends to shareholders, and these days it yields 9.6%. Does Enduro Royalty Trust tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Enduro Royalty Trust

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it paying an annual yield above 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Is is able to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

Does Enduro Royalty Trust pass our checks?

The current trailing twelve-month payout ratio for the stock is 20.7%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Enduro Royalty Trust as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Enduro Royalty Trust has a yield of 9.6%, which is high for Oil and Gas stocks.

Next Steps:

Taking all the above into account, Enduro Royalty Trust is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for NDRO’s future growth? Take a look at our free research report of analyst consensus for NDRO’s outlook.

2. Historical Performance: What has NDRO’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.