SandRidge Permian Beats Dividend Expectations By 10%

 |  Includes: PER, SD, SDT
by: Todd Johnson

SandRidge Permian Trust (NYSE:PER) made a terrific dividend announcement on October 28th. The company anticipated a dividend of 66 cents per share, per my prior articles "SandRidge Permian Trust: High Dividends Provide Short-Term Downside Protection" and "7 Must-Own Dividend Stocks For 2012". The trust announced a dividend of 72 cents per share. The dividend expectations were for 66 cents. The 72 cent dividend announcement was a positive sign for the trust's future. The 10 cent per share beat is notable. The stock has risen accordingly, as more investors have found the IPO in SEC filings, 3rd parties, and dividend newsletters. Click to enlarge Background

SandRidge Permian Trust (PER) is a statutory trust created on May 12, 2011 under the Delaware Statutory Trust Act. During August 2011, the Trust completed an initial public offering [IPO] of its common units, the net proceeds of which were submitted to SandRidge (NYSE:SD) as partial consideration for its conveyance to the Trust of Royalty Interests in the Underlying Properties as described below.

As part of the IPO, SandRidge (SD) conveyed, effective April 1, 2011, the Royalty Interests, which at June 30, 2011 included interests in (a) 517 Initial Wells, (b) 40 Additional Drilled Wells, and (c) 848 Remaining Development Wells within an AMI in which SandRidge presently holds approximately 16,800 gross acres (15,900 net acres). Per the IPO offering:

....SandRidge is obligated to drill, or cause to be drilled, the equivalent of 888 oil and natural gas development wells from drill sites on the leased acreage in the AMI on or before March 31, 2015. In the event of delays, SandRidge will have until March 31, 2016 to fulfill its drilling obligation to the Trust....

SandRidge Mississippian Trust I (NYSE:SDT)

I am long SandRidge Mississippian Trust I (SDT), as addressed in an October 2nd article "7 Dividend Stocks With An Income Investment Hedge" and a May 2011 article titled "High Yield Focus With SandRidge Mississippian Trust." On October 28th, SandRidge Mississippian Trust I announced a distribution of 82 cents per unit for the June 1, 2011 through August 31, 2011 time frame. The dividend was above 120% of the target distribution (the “Incentive Threshold”). This resulted in a distribution equal to the Incentive Threshold plus 50% of the amount by which cash available for distribution exceeded the Incentive Threshold.

SandRidge (SD) Counter Party Risk

SandRidge (SD) corporate and management monitor and are responsible for the two discussed trusts. A core issue is to monitor SandRidge on a regular basis. As investors, we depend upon SandRidge staff to methodically monitor the trust's operations and performance. So far, the company is delivering solid returns to all shareholders.

Summary I have taken the position, from day 1, that owning SandRidge Permian Trust (PER) and SandRidge Mississippian Trust I (SDT) are "boring" and "methodical" investments. The dividends are limited to the hedges in place. If oil and natural gas went up 100%, this would be immaterial. The Trust already has its hedges in place.

In a difficult economic environment, I want equities that produce results. Period. I don't want excuses. I demand execution and am 100% pleased with 1) SandRidge Permian Trust's (PER) 3rd quarter dividend announcement, and the 2) SandRidge Mississippian Trust I's (SDT) dividend announcement.

Disclosure: I am long SDT, PER.