Dorchester Minerals Stock: 11.2%-Yielder Trading Near Record High, Outlook Is Robust
December 22, 2023
Why DMLP Stock Has Risen in 2023
The crude oil market is volatile, with prices hinging on supply/demand metrics, economic conditions, and how the Organization of the Petroleum Exporting Countries Plus (OPEC+) is feeling at any given point. However, thanks to record-high oil production in the U.S., OPEC+ has less influence on oil prices than it once had.
With the expected U.S. crude oil and natural gas production for 2024, the outlook for companies like Dorchester Minerals LP (NASDAQ:DMLP) is pretty solid.
An oil and gas exploration and production company, Dorchester Minerals owns royalty properties (aka interests) in about 593 counties and parishes in 28 states. (Source: “Form 10-K: Dorchester Minerals, L.P.” United States Securities and Exchange Commission, November 2, 2023.)
This geographic diversity gives it exposure to virtually every single oil and gas-producing basin in the U.S., which allows it to take advantage of multiple commodity prices and development cycles.
Dorchester Minerals’ independent engineering consultant estimated that, as of December 31, 2022, the company had total proved oil and gas reserves of 92.7 billion cubic feet of natural gas equivalent. (Source: “Dorchester Minerals, L.P. Announces 2022 Results,” Dorchester Minerals LP, February 23, 2023.)
Of that total, 19% of the reserves were attributable to the partnership’s net profit interests and 81% were attributable to its royalty properties. As of the end of 2022, 42% of the company’s proved reserves were natural gas.
Thanks to high oil prices, Dorchester Minerals stock’s dividends and share price are robust. With inflation and interest rates coming down and a soft landing for the economy looking like a real possibility, DMLP stock’s outlook is pretty bright.
As you can see in the chart below, shares of Dorchester Minerals LP have been doing well since the COVID-19 pandemic, up by 423% from their March 2020 low (as of this writing). On July 20, Dorchester stock hit a record high of $31.52. While DMLP stock has gone down slightly since then, as of this writing, it’s still up by 12.5% year-to-date and 19.9% year-over-year.
For technical traders, Dorchester stock’s price crossed above its 50-week moving average on December 8. This suggests that DMLP stock is in an established uptrend.
Chart courtesy of StockCharts.com
Dorchester Minerals LP pays quarterly dividends that fluctuate based on its financial results, as well as oil and natural gas prices. As you can see from the red line in the above chart, Dorchester Minerals stock’s distributions have fluctuated quite widely over the years.
In 2021 and 2022, the partnership raised its payout every quarter. Over that period, Dorchester stock’s quarterly payout increased by 369% from $0.24226 to $1.135019 per unit. (Source: “Distribution History,” Dorchester Minerals LP, last accessed December 12, 2023.)
Nothing goes up forever, though. In January 2023, the company declared a quarterly distribution of $0.884339 per unit, followed by $0.989656 in April and $0.676818 in July.
For the third quarter ended September 30, the company announced net income of $29.46 million, or $0.73 per unit. (Source: “Dorchester Minerals, L.P. Announces Third Quarter Results,” Dorchester Minerals LP, November 2, 2023.)
This led management to declare a quarterly distribution of $0.84512 per unit, for a yield of 11.24%. That’s more than triple the current U.S. inflation rate of 3.14%.
With the U.S. expected to avoid a recession, inflation coming down, and expected interest rate cuts in 2024, it will be interesting to see how Dorchester Minerals does in a more oil and gas-friendly environment.
The Lowdown on Dorchester Minerals LP
Dorchester Minerals isn’t known for flashy press releases with flowery comments from management. In fact, you never hear from the company’s management team members. The company lets its numbers speak for themselves. It’s been consistently reporting solid quarterly financial results and paying reliable, high-yield distributions.
The outlook for energy stocks like Dorchester Minerals stock is tremendous. The North American oil and natural gas industry raked in record-high profits in 2022, and that momentum is expected to continue.
Analysts project that, in 2024, West Texas Intermediate oil will average $93.4 per barrel, while natural gas prices will average $3.23 million British thermal units (MMBtu), up by 24% from the 2023 average price of $2.61 MMBtu. (Source: “Natural Gas Forecast & Price Predictions December 2023” CAPEX, October 17, 2023.)
All things being equal, this should end up benefiting DMLP stockholders.
