Monthly Dividend Stock In Focus: Mesa Royalty Trust

Published on September 18th, 2025 by Bob Ciura

Monthly dividend stocks have instant appeal for many income investors. Stocks that pay their dividends each month offer more frequent payouts than traditional quarterly or semi-annual dividend payers.

For this reason, we created a full list of over 80 monthly dividend stocks.

You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter like dividend yields and payout ratios) by clicking on the link below:

Mesa Royalty Trust (MTR) has reinstated its monthly dividend. This potentially makes the stock more attractive for income investors looking for more frequent dividend payouts.

This article will analyze Mesa Royalty Trust in greater detail.

Business Overview

Mesa Royalty Trust was formed in 1979 and is based in Houston, Texas. It holds overriding royalty interests in natural gas and oil properties in the Hugoton field of Kansas and the San Juan Basin of New Mexico and Colorado.

The Trust does not operate the assets it receives 11.44% of 90% of the net proceeds from production on these properties after operating and marketing costs, with the interests managed and developed by third-party working interest owners such as Hilcorp San Juan LP, Scout Energy Group, Simcoe LLC, and Red Willow Production Company.

The Trust has a market cap of just $10.3 million.

On August 14th, 2025, Mesa Royalty Trust released its Q2 results the quarter ended June 30th, 2025. The Trust reported distributable income of $0.105 per unit before reserve adjustments, which after changes to the contingent reserve translated into $0.0946 per unit actually distributed, down from $0.1125 a year earlier.

Royalty income of $220,855 came entirely from the San Juan Basin – New Mexico properties operated by Hilcorp, while the Hugoton and San Juan, with Colorado properties again generating no net proceeds because costs topped revenues.

Excess production costs rose to $933,830, an increase from $793,838 at year-end 2024, and must be recovered before cash flow from those properties can resume. We believe the company has an earnings power of $0.80.

Growth Prospects

Mesa Royalty Trust’s performance over the past decade reflects the interplay of commodity pricing, production decline, and operator costs across its Hugoton and San Juan Basin properties.

Distributable EPU dipped in 2016 with weak gas prices, and then rebounded to $1.58 in 2017 as realized prices improved.

The following years, 2018 and 2019, saw lower payouts in line with softer gas markets. Late 2019 brought an operator shift when Scout Energy assumed control of the Hugoton properties from Riviera.

The COVID-19 downturn in 2020 drove distributable EPU down to $0.30 per unit, with the Trust also affected by excess production costs that temporarily suppressed cash flow.

Recovery in prices during 2021 lifted payouts modestly, and the 2022–2023 period delivered a windfall, with $1.98 and $1.53 per unit respectively, as natural gas and NGL prices surged.

That momentum faded in 2024, when lower commodity realizations and higher excess cost balances cut distributions back to just $0.25.

Dividend & Valuation Analysis

Mesa Royalty Trust pays out essentially 100% of its distributable cash flow, but this isn’t a red flag since the trust exists solely to pass through whatever net proceeds remain after operators deduct costs.

The trade-off is that distributions are inherently volatile, rising in commodity upcycles and shrinking when prices or volumes fall.

Regarding safety and quality, the Trust holds long-lived gas interests in the Hugoton and San Juan basins, but reserves are steadily depleting and it has no ability to acquire new assets.

Its competitive advantage is also nonexistent, as royalty trusts are passive vehicles with no operational control, though the structure does provide clean exposure to commodity price cycles without debt.

Recession resiliency is also limited, because while natural gas demand is steadier than oil in downturns, Mesa’s cash flows still swing with prices, and the trust has no buffer beyond withholding distributions in weak periods.

Mesa Royalty Trust’s P/E swings because both earnings per unit and the unit price move sharply with gas prices. In down years like 2016 and 2020, low earnings inflated P/E into the teens and 20s, while boom years like 2017 and 2022 drove ratios into single digits.

These extremes are one-offs from commodity cycles. Given reserves decline 4–6% annually and distributions shrink over time, a P/E around 7 is a reasonable midpoint. It’s high enough to reflect cash flow volatility, but low enough to price in depletion. Therefore, we believe the stock is more or less fairly valued today.

As a result, future returns will be derived mainly from future growth (expected at -2.0% annually) and the dividend, which currently yields 14.1%.

Total expected returns are around 12%, but the stock has a high level of risk and expected volatility. Therefore, we rate MTR stock a sell.

Final Thoughts

Mesa Royalty Trust can be an appealing vehicle for investors seeking pure, unleveraged exposure to natural gas prices and pass-through cash flow, with the simplicity of a debt-free structure and direct link between commodity cycles and distributions.

However, it is not a long-term investment, as the Trust has no reinvestment ability, no operational control, and steadily declining reserves that guarantee shrinking payouts over time.

Additional Reading

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.