Up to date on April ninth, 2026 by Nathan Parsh
Due to the varied choices obtainable within the inventory market, traders should purchase inventory in corporations of all styles and sizes. Firms with market capitalizations of $10 billion or extra are thought-about large-cap shares, whereas small-caps have market capitalizations beneath $2 billion.
Nevertheless, even smaller corporations are buying and selling in the US. For instance, micro-caps typically have market capitalizations of $300 million or much less.
Cross Timbers Royalty Belief (CRT) is a micro-cap, and a tiny one at that—its market capitalization is simply $63 million. Though its market capitalization is minuscule, its dividend is kind of massive. Cross Timbers inventory has a dividend yield of 5.7%.
Plus, Cross Timbers pays a month-to-month dividend. Certain Dividend has compiled a database of 119 month-to-month dividend shares (together with necessary monetary metrics reminiscent of dividend yields and payout ratios) which you’ll be able to entry beneath:
Regardless of its excessive yield and month-to-month dividend payouts, Cross Timbers has a extremely unsure outlook. The corporate has a really dangerous enterprise mannequin, and its annual dividend payouts declined steadily between 2014 and 2020 and from 2022 to 2025.
Subsequently, solely essentially the most risk-tolerant traders ought to take into account shopping for Cross Timbers.
Enterprise Overview
Cross Timbers Royalty Belief was created on February 12, 1991, and it earns cash from two sources. First, earnings is derived from a 75% web earnings curiosity in seven oil-producing properties in Texas and Oklahoma operated by established oil corporations.
As well as, earnings is generated from a 90% web earnings curiosity in gas-producing properties in Texas, Oklahoma, and New Mexico. The first gas-producing discipline is the San Juan Basin in northwestern New Mexico.
The belief was created to gather web earnings after which make distribution funds to unitholders primarily based on that earnings. XTO Vitality, a subsidiary of ExxonMobil (XOM), pays the belief’s web earnings on the final enterprise day of every month.
CRT’s 75% web earnings curiosity is diminished by manufacturing and improvement prices, whereas the 90% web earnings curiosity is just not topic to those prices. With out manufacturing and improvement prices, the 75% web earnings curiosity earnings is often solely affected by modifications in gross sales volumes or commodity costs.
CRT had royalty earnings of $12.5 million in 2022, $12.3 million in 2023, $6.6 million in 2024, and $5.7 million in 2025. Final yr, oil comprised about three-quarters of whole revenues whereas gasoline comprised the remaining.
On March twenty seventh, 2026, CRT reported monetary outcomes for the fourth quarter of the fiscal yr 2025.
Oil volumes decreased by 7%, however gasoline surged 59% in comparison with the identical time within the prior yr. As well as, the common realized value of gasoline grew 14%. Consequently, distributable money movement (DCF) per unit grew by 11%.
The battle in Iran has pushed the worth of oil as much as ~$100 per barrel, which ought to lead to a major enhance in distributions within the upcoming months for shareholders. Based mostly on the distributions thus far this yr, shares of the corporate yield 5.7%.
Progress Prospects
One of many main catalysts for Cross Timbers shifting ahead could be increased oil and gasoline costs. Falling commodity costs weighed on the earnings derived by the belief in 2014-2020. Alternatively, due to the rally of oil and gasoline costs to 13-year highs in 2023, CRT achieved an 8-year excessive DCF per unit that very same yr. Sturdy commodity pricing can enhance distributable earnings and, due to this fact, the share value. The present battle within the Center East is probably going to offer strong leads to the near-term.
CRT has very minimal working bills since it’s a royalty belief. Because of this its working leverage is large when income rises. Due to this, oil and gasoline costs are vital for the belief’s distributable earnings; therefore, its progress is nearly totally dependent upon commodity costs.
The belief has generated a median distributable and distributed money movement of $1.18/unit yearly for the previous 10 years, although with a noticeable lower for a lot of this era outdoors of 2022 and 2023. The distribution development basically parallels the development in oil and gasoline costs.
Furthermore, CRT estimates that the speed of pure manufacturing decline of its oil and gasoline properties is 6%- 8% per yr. It is a important headwind for future returns. That stated, we count on 20% common annual progress of distributable money movement over the following 5 years given the very low comparability base.
Dividend & Valuation Evaluation
Since Cross Timbers is a belief, its distributions are labeled as royalty earnings. Because the distributions are thought-about unusual earnings, they’re taxed on the particular person’s marginal tax price.
Cross Timbers’ distributions are declared 10 calendar days earlier than the file date, the final enterprise day of every month. The corporate’s distributions declined steadily between 2014 and 2020, reflecting weak commodity costs, however recovered in 2021 and 2022 due to a robust restoration in oil and gasoline costs.
In 2018, Cross Timber paid cumulative dividends of roughly $1.43 per share. Nevertheless, 2019 noticed distributions fall to $0.87 per share, adopted by an extra decline to $0.77 per share in 2020.
Fortuitously, distributions partly recovered in 2021, as oil and gasoline costs rallied significantly off the pandemic lows. Consequently, CRT provided whole distributions of $1.92 per unit in 2023 for a median annual distribution yield of 10.9% in that yr.
Furthermore, the belief provided a 10-year excessive distribution per unit of $1.96 in 2022, due to the multi-year excessive oil and gasoline costs that prevailed all through final yr. Distributions have fall since and have an anticipated whole of ~$0.60 for the present yr primarily based on the quantity obtained for the primary 4 funds of the yr.
Cross Timbers is undoubtedly a excessive dividend inventory. However its variable payout can swing wildly, relying virtually totally on the route of oil and gasoline costs. Based mostly on its distributions within the final 12 months, the inventory at the moment gives a 5.7% distribution yield.
Nevertheless, we notice that the belief is totally dependent upon commodity costs it has no management over. The belief continues to distribute basically all of its earnings, because it has since its inception. Dividend protection isn’t going to be robust on condition that Cross Timbers is required to distribute mainly all of its earnings.
Future distribution progress is reliant upon increased distributable earnings. Consequently, the belief’s distribution progress potential is basically a guess on oil and gasoline costs. If commodity costs stay elevated, the belief will preserve providing extreme distributions. Nevertheless, we notice the excessive cyclicality of oil and gasoline costs and their extreme draw back threat off their present ranges in the long term, particularly given the secular shift from fossil fuels to renewable vitality sources.
The underside line for Cross Timbers’ distribution is that it is rather unpredictable. Whereas the headline yield is attractive, remember the fact that there’s important variability in any explicit month’s payout, relying on commodity costs and manufacturing ranges. Buyers ought to take into account the danger and volatility related to oil and gasoline royalty trusts earlier than shopping for Cross Timbers.
Shares commerce at 32.1x anticipated distributable money movement per unit, which is properly forward of our goal of 9.0x. Reverting to our goal by 2031 would scale back annual returns by 22.4% over this era.
In whole, we count on whole returns of three.8% per yr by 2031 because of 20% progress price, the beginning yield of 5.7%, and a major headwind from a number of contraction.
Ultimate Ideas
Cross Timbers offers traders a singular method to play probably increased oil and gasoline costs sooner or later whereas realizing month-to-month earnings alongside the way in which. Nevertheless, traders ought to keep in mind dangers and distinctive traits earlier than shopping for shares of a royalty belief.
Cross Timbers is a micro-cap, which means it’s extra risky and thinly-traded than bigger corporations. It’s also a royalty belief, which carries its personal dangers.
Lastly, Cross Timbers is just not a long-term ‘sleep properly at night time’ dividend progress inventory. Future outcomes are dependent upon oil and gasoline costs and the true quantity of reserves within the properties during which it’s .
Consequently, Cross Timbers is simply a really useful inventory for traders who settle for the dangers of royalty trusts and micro-caps. On account of an absence of distribution progress over the previous few years, we price the inventory as a promote.
Don’t miss the sources beneath for extra month-to-month dividend inventory investing analysis.
And see the sources beneath for extra compelling funding concepts for dividend progress shares and/or high-yield funding securities.
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