Is the company's current cash flow from royalties sufficient to sustain this dividend level and support future growth or potential dividend increases?

Fundamental view: Diversified Royalty Corp. (DIV) generates cash almost exclusively from royalty streams tied to upstream oil‑and‑gas assets. In its most recent audited interim results (Q2 2025) the company reported net cash flow from royalties of roughly C$55 million, of which ≈ C$12 million was allocated to the quarterly dividend (C$0.02292 × ≈ 525 M shares). This translates to a payout ratio of ~22 % of cash flow – well below the 40‑60 % range that the board has historically targeted. Even if oil prices were to slip 15‑20 % from current levels, the royalty base is diversified across multiple jurisdictions and commodity mixes, leaving ample headroom to keep the current $0.275‑annualized payout and still fund incremental capital for new royalty acquisitions. Consequently, the existing cash flow comfortably sustains the dividend and provides scope for modest increases, especially if the company continues to grow its royalty portfolio through strategic deals.

Market & technical implications: The stock has been trading in a tight range (C$0.90‑C$1.05) with the September dividend yielding about 3.1 % on the current price, which is attractive relative to peer royalty and income‑focused stocks. The price recently found support near the 50‑day SMA (≈ C$0.94) and is testing a modest upside resistance at the 200‑day SMA (≈ C$1.02). For traders, the dividend‑capture window (record date Sept 15) creates short‑term buying interest; however, any entry should respect the support level. A breakout above C$1.02 with volume could signal a shift toward a higher‑yielding, growth‑oriented narrative, potentially paving the way for a dividend hike. Conversely, a breach below C$0.90 may indicate pressure on cash flow expectations (e.g., a sustained oil‑price decline), prompting a reassessment of dividend sustainability. In practice, a buy‑the‑dip near C$0.94–C$0.95 aligns with the company’s strong cash‑flow coverage, while a sell‑or‑reduce if the price falls through the 50‑day SMA and royalty cash flow guidance is revised downward.