Dorchester Minerals: 10% Yield On Energy Royalties, Plus Peers

Core Viewpoint - Dorchester Minerals, L.P. (DMLP) operates similarly to royalty trusts by collecting royalties from energy producers and distributing 100% of its net income to unitholders, making it an attractive high-yield investment option in the energy sector [1][5]. Company Overview - Dorchester Minerals, L.P. is involved in acquiring, owning, and managing royalty properties across the US, with interests in 593 counties and parishes in 28 states [2][3]. - The company was founded in 1982 and is headquartered in Dallas, Texas, with significant holdings in Texas (1.89 million gross acres), North Dakota (523,000 gross acres), and Montana (366,000 gross acres) [3]. Revenue Composition - DMLP's revenue sources include 77% from oil, 14% from gas, and 9% from natural gas liquids, with 72% of revenues derived from royalties and 26% from net profits interests (NPI) [5]. Reserves and Production - As of December 31, 2023, DMLP had total reserves of 13.9 million barrels of oil equivalent (MMBoe), reflecting a decrease in production but an increase in reserves due to revisions and acquisitions [7]. - The company has seen significant increases in oil production (15%), gas production (25%), and natural gas liquids production (154%) from 2019 to 2023 [9]. Financial Performance - In Q1 2024, DMLP reported operating revenues of $30.98 million, a decline of 22.88% compared to Q1 2023, with net income decreasing by 35.27% to $18.17 million [11][14]. - The average prices for oil and natural gas sales in Q1 2024 were $63.89 per barrel and $2.37 per thousand cubic feet, respectively [12]. Dividends - DMLP's most recent distribution was $0.7818, yielding 9.88%, with a strong 5-year dividend growth average of over 24% [15][16]. - The coverage ratio for distributions dropped to 0.68 in Q1 2024, indicating a decrease in cash flow relative to distributions [18]. Market Position - DMLP has a market capitalization of approximately $1.27 billion, placing it in the middle tier among similar companies in the energy sector [20]. - The company has a trailing yield of 10.45%, which is competitive compared to peers like Black Stone Minerals and Kimbell Royalty [21]. Performance Metrics - DMLP's total return over the past year was 17.63%, outperforming many peers, with a notable yield contributing to this performance [24]. - The company has lagged the energy sector in 2024 but has shown resilience with a strong yield [24]. Management and Governance - DMLP's general partner has no incentive distribution rights, aligning management interests with unitholders, as management's limited partner interest exceeds its general partner interest by 2.3 times [26].