All it does is invest in income-producing assets and collect royalties on those assets. So far, it sounds pretty good. A company with a huge yield and very few moving parts but how safe is that 19.5% dividend?
About as safe as a drunk 16-year-old behind the wheel of a Ferrari, having an argument with his girlfriend via text message. In other words, it’s not safe.
Hey, That’s the Wrong Way!
The company has investments in 161 wells, all of which are now drilled. However, quarterly royalty income is at its lowest level in the company’s history.
In this case, because there are so few expenses, it all comes down to how much production SandRidge gets out of the wells it invested in. Considering it will be tough to increase production from already producing wells, and the company has no more wells left to drill, that alone makes the likelihood of another dividend cut in the next year extremely high.
Combine that with a history of dividend cuts in nearly every quarter in the company’s short history, and it’s almost a given that its dividend is going to be cut further. If there were a grade lower than F, I’d give it to SandRidge Mississippian Trust I (NYSE: SDT). But F is as low as I can go.
Dividend Safety Rating: F