Readers often ask, “Why do you recommend stocks with shaky dividend histories?” It’s a fair question. Great companies usually have long histories of growing distributions, so it seems odd to skip this criteria when picking a stock. Usually, it’s because things seem to be improving at the company. Other times, I’m willing to take a high risk to lock in an exceptionally high yield. Sometimes, both of these things are in play...
That’s the situation with Dorchester Minerals LP (NASDAQ:DMLP), a limited partnership that owns hundreds of oil and natural gas wells across the United States. The stock’s 12% dividend yield comes with a lot of risk, and you don’t need an MBA to figure out why. Dorchester Minerals cut its distribution in 2013, 2015, and 2016. When management reduces the payout, it tells shareholders that the dividend is not too valuable to be tampered with. While some firms do whatever it takes to maintain their dividend, others, like Dorchester, will change their payout whenever it suits them.
Source: Income Investors
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