DMLP

Dorchester Minerals $DMLP: $2M Insider Buying vs 25% Stock Plunge... The 12% Dividend Truth

09/08/2025 17:41

Dorchester Minerals $DMLP insiders continue their persistent buying activity despite the stock's declining trend, drawing significant investor attention. This Dallas-based master limited partnership (MLP) specializes in oil and natural gas mineral rights and royalty interests, operating a unique business model that generates pure royalty income without drilling or production operations. Established in 1982, the company holds mineral rights across 594 counties in 28 states, creating stable cash flows from major oil and gas regions including the Permian Basin, Eagle Ford Shale, and Haynesville Shale. With an efficient organizational structure of approximately 27 employees, the company maintains high profitability ratios. The most striking development is the consistent insider buying pattern. CEO Bradley Ehrman purchased a total of 20,586 shares across three transactions from June 2024 to March 2025, with a notable bulk purchase of 14,430 shares at $34.41 per share in December 2024. CFO Leslie Moriyama also demonstrated strong confidence with two purchases totaling 15,268 shares in November and December 2024. Even more remarkable is the continuous buying by Dorchester Minerals Operating LP, the operating entity. From July 2024 to May 2025, they conducted over 10 consecutive purchase transactions totaling more than $2 million. Most recently, Director Frank Box joined the insider buying trend with a 4,000-share purchase at $25.57 per share on September 5, 2025. This aggressive insider buying contrasts sharply with the stock's performance. $DMLP shares started around $29 in June 2024, peaked at $33 in January 2025, but have since declined to the current $25 level—a roughly 25% correction from the highs. Investors should focus on the company's dividend policy as a key consideration. The attractive 12% dividend yield appeals to income investors, but the 180%+ payout ratio raises sustainability concerns. This indicates dividends exceed net income, likely funded through cash reserves or asset sales. However, the company's exceptionally low debt ratio of 0.28% and strong cash flow provide near-term dividend security. From a financial health perspective, $DMLP maintains solid fundamentals. With total debt of only $907,000, the company operates essentially debt-free with a current ratio of 11.61, indicating excellent short-term liquidity. ROA of 20.09% and ROE of 32.89% demonstrate strong profitability, supporting insider investment confidence. Recently, the company announced acquisition of mineral interests in Colorado in September 2025, expanding geographic diversification to reduce risk concentration. However, the reported 56% profit decline in August 2025 and quarterly earnings growth of -47.8% indicate near-term performance pressures. Amid broader energy sector volatility, $DMLP's beta of 0.63 positions it as a relatively stable investment option compared to market averages. Valuation metrics including P/E ratio of 14.40 appear reasonable relative to industry peers. Looking forward, several scenarios merit consideration. In an optimistic case, oil price recovery could improve royalty income, validating insider judgment. The base case scenario involves maintaining current dividend levels with gradual share price recovery. The risk scenario to watch involves potential dividend cuts due to further energy price declines. Investors should monitor specific indicators including next quarter's royalty income recovery, cash flow improvements, and dividend policy signals. The Q3 2025 earnings report scheduled for October 30 will likely serve as a crucial inflection point. In conclusion, $DMLP offers attractive elements including strong insider confidence and high dividend yields, while carrying risks from recent performance weakness and dividend sustainability concerns. Conservative income-focused investors may find it worth considering, but should carefully assess dividend cut risks before investing.