Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan
Member's Area

Monthly Dividend Stock In Focus: Sabine Royalty Trust

Updated on March 7th, 2023 by Aristofanis Papadatos

Sabine Royalty Trust (SBR) has a high dividend yield of 9.0% based on annualized distributions over the first three months of 2023. This places Sabine on the high dividend stocks list. You can see all 200+ 5%+ yielding stocks here.

Sabine also pays dividends on a monthly schedule, which means investors receive their dividends more frequently than the traditional quarterly schedule.

There are 84 monthly dividend stocks. You can see our complete list of monthly dividend stocks, with important financial metrics like dividend yields, price-to-earnings ratios, and payout ratios, by clicking on the link below:


Royalty trusts have unique characteristics and risk factors, which investors should consider before investing. But they could be appealing for income investors thanks to their high yields. And, investors looking for exposure to the oil and gas industry may find them attractive.

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 Overview

Sabine Royalty Trust was established on December 31st, 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 $1.1 billion.

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 million cubic feet of gas.

At inception, the lifespan of the trust was pegged at 9 to 10 years. The trust was expected to be fully depleted by 1993. 40 years later, Sabine Royalty Trust is still kicking. In that time, the trust has produced approximately 22 million barrels of oil and 275 million cubic feet of gas.

Sabine has paid out more than $1.3 billion in distributions to unitholders over the course of the past 40 years. The most recent forecasts are for remaining reserves of 6.0 million barrels of oil and 42.7 million 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.

In early November, Sabine reported (11/10/22) financial results for the third quarter of fiscal 2022. Oil Production grew 7% over the prior year’s quarter while production of gas grew 77%. In addition, the average realized prices of oil and gas grew 65% and 142%, respectively, thanks to the sanctions of western countries on Russia, which led to multi-year high oil and gas prices. As a result, distributable cash flow per unit more than doubled, from $2.39 to $6.13.

Thanks to the strong tailwind from the Ukrainian war, Sabine posted 10-year high distributable cash flow per unit of $8.65 last year. The distributions of $8.65 in 2022 correspond to a yield of 11.2% at the current stock price.

Due to the sanctions imposed by the U.S. and Europe on Russia for its invasion in Ukraine, the global oil and gas markets became extremely tight last year. Before the sanctions, Russia was producing about 10% of global oil output and one-third of natural gas consumed in Europe. Due to the sanctions, the prices of oil and gas rallied to 13-year highs in 2022.

However, the global energy market has somewhat absorbed the impact of the Ukrainian crisis. As a result, the price of oil has fallen below its level just before the onset of the Ukrainian crisis. In addition, the price of natural gas has plunged lately due to an abnormally warm winter in the U.S. and Europe. As a result, Sabine cut its monthly distribution by 30% this month. The new monthly distribution corresponds to a 7.3% annualized yield.

Growth Prospects

The biggest growth catalyst for Sabine is rising oil and gas prices. Supportive commodity prices are critical for the trust’s ability to generate higher royalty income, which yields higher distribution payouts. As oil and gas prices both rallied to multi-year highs in 2022, SBR achieved blowout results last year.

Sabine is a pass–through vehicle for royalty payments –essentially all the royalty income (cash) it receives is passed through to unit holders. About 5%–8% of royalty income is consumed in administrative expenses. The trust has generated an average annual distributable cash flow of $3.68 per unit over the last decade. This corresponds to a 4.8% yield at the current stock price.

However, the cash flows of Sabine are highly cyclical due to the dramatic swings of the prices of oil and gas, which have resulted in a markedly volatile performance record. Given the high comparison base formed by the 10-year high distributable cash flow per unit of $8.65 in 2022, we expect a 15.0% average annual decline of distributable cash flow per unit over the next five years.

Dividend Analysis

Sabine Royalty Trust pays a monthly distribution. The record date each month is usually the 15th day.
Distributions are paid no later than 10 business days after the monthly record date.

The distribution of Sabine fluctuates depending on the direction of oil and gas prices. During favorable periods, the trust has distributed $3-$4 per unit annually. Thanks to blowout commodity prices, the trust exceeded this level by an impressive margin last year.

Sabine’s distribution history over the past 10 years is as follows:

Sabine distributed approximately $8.65 per unit to investors in 2022. That was more than double the distribution in 2021 thanks to the tailwind from the Ukrainian crisis and the resultant rally of the prices of oil and gas.

Sabine has distributed $1.73 per unit in the first 3 months of 2023. On an annualized basis, this represents a full-year payout of roughly $6.92 per unit. This equates to a distribution yield of 9.0%. Of course, the company could distribute more or less than this, depending on where oil and gas prices are headed over the remainder of the year.

On the bright side for the trust, the ongoing war between Russia and Ukraine has no end in sight and hence the price of oil may remain elevated in the upcoming months. On the other hand, whenever this war comes to an end, it will probably cause a sharp correction in the price of oil.

It is also important to note that most countries have been severely hurt by the exceptionally high prices of oil and gas in the last 12 months. As a result, they are doing their best to diversify away from fossil fuels and thus they are currently investing in renewable energy projects at a record pace. When all these clean energy projects begin to come online, in 2 to 4 years, they will take their toll on global consumption of oil and gas.

In fact, as the market is always a forward-looking mechanism, whenever the market focuses on the potential impact of these projects on the energy market, the price of oil will probably plunge from its current level.

Final Thoughts

Royalty trusts like Sabine are essentially a bet on commodity prices. From an operational standpoint, the fundamentals of the trust look strong. Sabine has high-quality oil and gas properties that have kept the trust going for four decades, which is much longer than originally expected.

If oil and gas prices remain around their current levels for years, the assets of the trust could potentially be undervalued. However, we believe that oil and gas prices will enter another downcycle at some point in the future, just like they always have. Whenever the next downturn of the energy sector shows up, Sabine will have significant downside risk while it will also reduce its distributions. Overall, investors should carefully review the risks and unique considerations that go along with investing in volatile royalty trusts.

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.

Thanks for reading this article. Please send any feedback, corrections, or questions to