When it comes to dividend investing, one of the most important factors is the dividend yield. The question is ‘how much of a dividend yield’ should you target? Most reputable companies pay less than 2% per annum. For example, Apple Inc. pays 0.62% per annum. This might not even be sufficient to cover the degrading monetary value due to inflation. However, these companies might provide you great stock value appreciations. But dividend investors are not after growth stocks.

A decent dividend yield would be within the range of 5% – 7% per annum. So, this company we are about to tell you is something out of the ordinary. When even a 10% dividend yield is considered ‘high’ and ‘risky,’ Newport Exploration Ltd. (NWX.V) yields a massive 15.73% annual yield as of this article date.

At the market close on July 20, 2021, the share price of Newport Exploration stood at CA$ 0.44, and the company pays a dividend of CA$ 0.07 dividend per share. The share price has seen little volatility in the past 6 months, with a high of CA$ 0.59 and a low of CA$ 0.37.

Company profile: Newport Exploration Ltd

Newport Exploration Ltd. is a natural resource company that engages in the acquisition and exploration of resource properties. The company holds a 100% interest in the Chu Chua copper-gold project located to the north of Kamloops, British Columbia, Canada. It also holds a 2.5% gross overriding royalty interest on oil and gas permits in the Cooper Basin in Queensland, Australia.

The Cooper Basin is one of Australia’s largest onshore oil and gas development lands.

The company pays a quarterly dividend and has been consistent with its dividend pays since they began paying dividends in 2019. However, this is no guarantee that they will continue to do so in the future.

As of April 30, 2021, Newport Exploration sits on an amazing balance sheet position. It has CA$ 2.4 million cash in hand, CA$ 3.4 million short-term investments, and just CA$ 18,048 payables and liabilities. However, a major problem with their financials is the lack of revenue growth coupled with this insane dividend payout. The company’s main source of revenue is the royalty income of CA$ 2.5+ million per quarter. Their latest financials read “The receipt of royalty payments is considered to be highly variable, and as such these payments are not indicative of additional near-term income or any future income.” However, the silver lining for the company is that its operating expenses remain minimal, around CA$ 400,000 per quarter. This enables the company to record a net income of around CA$ 1.5 million per quarter.

So, this is a relatively ‘risky’ investment and we do not suggest dumping all your money into the shares of this company.

In the latest Management Discussion and Analysis (MD&A) of the company, the management declares that “stability, profitability, and paying shareholder dividends has been a responsible corporate strategy and recognizes that the Company’s ability to pay over the long term is very important to existing shareholders and potential investors. The dividend strategy has enabled the Company to maintain dividend distributions during the decline in the price of oil in early 2020 and the reduction in global oil demand due to the COVID-19 pandemic.”

The insane dividend yield of Newport Exploration is not something out of chance. The management is aware of the returns to their investors

An investment of $20,000 in the company will yield you over CA$ 262 per month or CA$ 3,146 per annum in dividends.

Make sure to do your own analysis before investing in this company or any company.

Disclaimer: PersonalFinanceGuide has invested in Newport Exploration Ltd. at the time of this article and may or may not buy more or sell the holding in its entirety. We take no obligation to disclose this information in the future, however, you may follow the progress on my dividend stock portfolio updates.