PermRock Royalty Trust's Dividend Dilemma: Can Falling Oil Prices and High Payouts Be Sustained?

PermRock Royalty Trust (NYSE: PRT), a pure-play oil and gas royalty streamer, has long been a darling of income investors for its high dividend yield. However, recent trends in its financials and commodity markets are raising red flags about the sustainability of its payouts. Let's dissect whether PRT's dividend machine can survive in a volatile energy landscape—or if investors are chasing a fading star.

The Dividend Decline: A 50% Drop in 2024

PermRock's dividend history tells a story of diminishing returns. In 2023, the trust distributed $0.51 per unit annually, but by mid-2024, payouts had collapsed to just $0.24 year-to-date—a 53% drop (see ). The trend has worsened in 2025, with April's distribution falling to $0.0238 per share, down sharply from $0.0503 in the same month two years prior.

The math is stark: PermRock's payout ratio now sits at 100%, meaning dividends are entirely dependent on current earnings with no room for error. This leaves investors vulnerable to any earnings shortfall—a real risk given the trust's reliance on oil and gas prices.

Commodity Volatility: The Sword of Damocles

PermRock's income is tied directly to the production and sale of oil and gas from the Boaz Energy-operated properties. When commodity prices drop, so does PRT's revenue.

The chart above shows how oil prices have fluctuated between $70 and $130 per barrel since 2020, while natural gas prices have been even more volatile. In 2024, average oil prices fell to around $75/bbl, down from $85/bbl in 2023. This drop directly hit PermRock's top line, as its Q1 2025 oil cash receipts fell by $0.18 million due to lower sales volumes and prices.

The trust's financials confirm the exposure: its return on capital employed (ROCE) has plummeted from 11% in 2019 to 7% in late 2024, below the industry average of 10%. This signals inefficiency or declining production, both of which are exacerbated by volatile commodity markets.

Cost Management: A Mixed Picture

PermRock has made some progress in trimming costs. Direct operating expenses fell by $0.28 million month-over-month in early 2025, and its debt-to-equity ratio remains conservative at 0.33, below the industry's 0.50. However, capital expenditures have inched up slightly, and the trust's ROCE decline suggests that cost savings aren't offsetting the headwinds from lower commodity prices or operational challenges.

The trust's liquidity is strong, with a current ratio of 4.0 and $12 million in operating cash flow in early 2025. But liquidity alone can't mask the fact that PermRock's distributable income is a direct function of commodity prices—a risky bet in an uncertain energy market.

The Bottom Line: A High-Yield Gamble

PermRock Royalty Trust's 12% dividend yield (as of September 2024) is enticing, but it's built on shaky foundations. Key risks include:
1. Commodity Exposure: Oil and gas prices are notoriously volatile, and PermRock has no hedging program to buffer against drops.
2. 100% Payout Ratio: No earnings cushion exists to absorb shocks.
3. Structural Decline: The ROCE drop and payout cuts suggest PermRock's best days may be behind it.

Investors should also note that the NYSE's T+1 settlement rule, effective May 2024, complicates timing for dividend capture—a minor nuisance but another layer of complexity.

Investment Takeaway: Proceed with Caution

PermRock Royalty Trust is a high-risk, high-reward play. The dividend yield is tempting, but the structural issues—dependence on volatile commodities, declining ROCE, and razor-thin margins—make this a bet on oil prices rebounding sharply.

For income investors, PRT is a “all-in” wager on energy prices. If crude stays above $80/bbl, the dividends might stabilize. Below that, cuts are likely.

For speculators, PRT's stock could see volatility tied to oil price swings. The stock's 5-year 206% gain reflects past optimism, but fundamentals now lag behind sentiment.

Final Verdict

PermRock Royalty Trust's dividend sustainability hinges entirely on oil prices and operational improvements. With commodity markets in a holding pattern and PermRock's ROCE in decline, the trust is a speculative trade, not a core holding for income seekers. Investors chasing yield here must be prepared for the possibility of further cuts—or even a dividend suspension if oil prices falter.

In short: PRT's dividend machine is sputtering. Proceed with caution—or better yet, wait for clearer skies.