HK Interview in Value Investor Insight

Active Voice

When we first bought into this in 1995, we basically signed on for a 5% or so return from stock buybacks and the dividend, with pretty much infinite call options on what they could make happen with the land. Maybe people wanted to develop it. Maybe there was oil there that could one day be economically extracted.  We didn’t really know, but we liked the potential odds.

HK has the same questions as the rest of us.

With respect to capital allocation, an increasingly important question for TPL
is how it will deploy its increasing earnings.  The trust has been repurchasing and
cancelling shares for 120 years, but there’s a limit to the number of open-market purchases that can be made when average daily trading volume is less than 20,000 shares. With capital-expenditure requirements limited, it’s not a stretch to conclude we’re going to see a big increase in dividend payments. The dividend yield is still very low on a $600 share price, but in February of this year the Trustees raised the regular dividend from 35 cents per share to $1.05, and paid an additional special dividend of $3 per share. One doesn’t require a graph to infer the near-term slope of the line. We wouldn’t be surprised if over time TPL qualified for a dividend ETF or a REIT ETF.