Dividend investors have to be pleased with how Franco-Nevada (NYSE:FNV) has treated them over the years. For more than a decade, the streaming and royalty specialist has increased its payouts to shareholders each and every year, including its most recent 4.5% increase. Yet dividend growth has slowed down recently, and that has some investors wondering whether Franco-Nevada's dividend potential is as strong as its past history. By looking at its recent earnings and business activity, you can get a better sense of where Franco-Nevada is likely to go with its dividend strategy going forward.

What's come before for Franco-Nevada's dividends?

Franco-Nevada has made a number of changes to its dividend payouts in the past. Early in its history, the company began with a quarterly payout, but it later decided to shift to a monthly payout structure instead. That lasted for several years in the early 2010s, but in 2014, Franco-Nevada went back to a quarterly payout structure.

Over the entire period, Franco-Nevada has roughly doubled its dividend payments on a quarterly basis. That's impressive growth, especially in an industry that has seen dramatic volatility over that time period. With gold prices having climbed to unprecedented levels only to fall back in cataclysmic fashion, Franco-Nevada's business model has enabled it to stay ahead of the mining industry and even find opportunity when many precious-metals companies were flirting with bankruptcy.

a drilling rig in a winter scene.

Image source: Franco-Nevada.

Where Franco-Nevada is headed

The drop in gold and other precious metals prices came at an opportune time for Franco-Nevada, allowing it to put new capital to work and extract favorable terms from its mining partners. However, now that gold has recovered substantially, mining companies are now largely back on firm footing, and that has made the sorts of deals that Franco-Nevada can profit from the most harder to find.

In response, Franco-Nevada has instead looked to the energy market. Crude oil and natural gas prices remain extremely low compared to recent history, and that opens the door to Franco-Nevada being able to make royalty arrangements that have favorable terms for the company. Although Canada has been a hotbed of activity for Franco-Nevada in the past, company executives believe that the U.S. market might have better prospects for future deals, especially because more of the oil and gas assets in the U.S. are privately owned and therefore fully available for financing arrangements of the sort that Franco-Nevada prefers to make.

Investors need to be patient

That said, Franco-Nevada isn't likely to accelerate the pace of its dividend growth anytime soon. That's because the company has instead identified putting new capital to work in securing new deals as the priority going forward.

In particular, Franco-Nevada wants to shift the mix of its assets toward energy in the future. Right now, about 95% of the company's revenue comes from gold and other precious metals. However, Franco-Nevada has set a goal of boosting the share of revenue from oil and gas assets from 5% to 20%. That will take hundreds of millions of dollars of capital investment over time, but Franco-Nevada has the cash flow and financial resources to make the big shift gradually. If the energy market responds with outperformance compared to gold and other precious metals, then Franco-Nevada's timing will have turned to be ideal.

However, if streaming and royalty deals keep paying off, Franco-Nevada will eventually get to the point at which it has the portfolio mix it wants. At that point, diverting excess capital to shareholders could lead to much more substantial dividend boosts. That could take a while, but when it happens, Franco-Nevada shareholders hope that their patience will be duly rewarded.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.