Please ensure Javascript is enabled for purposes of website accessibility

Shares of BP Prudhoe Bay Royalty Trust Plunge After Disappointing Dividend

By Tyler Crowe - Apr 8, 2019 at 1:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors who saw the previous quarter's dividends were probably wondering why this past quarter's payout was so paltry.

What happened

Shares of oil and gas royalty trust BP Prudhoe Bay (BPT 4.51%) are down 17% as of 11:45 a.m. EDT today. The likely impetus for today's drop was the Friday announcement of the trust's dividend payout for the quarter. 

pumpjacks at sunset.

Image source: Getty Images.

So what

If you were to look up BP Prudhoe Bay's dividend payouts over the past year, you would find that the trust paid out about $5.07 per share -- which, at today's stock price, makes for a rather fat yield of better than 18%.

I'm sure that there were a few people out there who saw that number and immediately assumed this stock was a steal.

The trouble is, BP Prudhoe Bay's dividend isn't a fixed amount. It is a royalty payment based on the price of a barrel of oil during the quarter and the amount that the operator of the field -- in this case, BP (BP 2.65%) -- extracts. During the fourth quarter, oil prices were considerably lower than what they were in the previous quarters. As a result, the royalty payment for the quarter was $0.33 per unit.

Brent Crude Oil Spot Price Chart

Brent Crude Oil Spot Price data by YCharts

Now what

It's hard to say precisely what happened to cause the stock to drop today, but since the dividend payment isn't due until April 22, some investors are probably exiting after seeing that paltry payout. 

That is the name of the game with royalty trusts, though, as their payouts are almost wholly dependent upon the price of oil and gas in the quarter. This most recent quarter wasn't a great one for investors, but with Brent oil prices sneaking up closer to $70 per barrel, chances are the next quarterly payout will be higher. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BP Prudhoe Bay Royalty Trust Stock Quote
BP Prudhoe Bay Royalty Trust
BPT
$16.67 (4.51%) $0.72
BP p.l.c. Stock Quote
BP p.l.c.
BP
$32.11 (2.65%) $0.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.