Reviewing SandRidge Mississippian Trust II (SDR) & Cimarex Energy (XEC)

SandRidge Mississippian Trust II (NYSE: SDR) and Cimarex Energy (NYSE:XEC) are both energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, analyst recommendations, institutional ownership, profitability and risk.

Analyst Recommendations

This is a breakdown of current ratings and price targets for SandRidge Mississippian Trust II and Cimarex Energy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SandRidge Mississippian Trust II 0 0 0 0 N/A
Cimarex Energy 0 7 17 0 2.71

Cimarex Energy has a consensus price target of $136.85, suggesting a potential upside of 6.71%. Given Cimarex Energy’s higher probable upside, analysts clearly believe Cimarex Energy is more favorable than SandRidge Mississippian Trust II.

Dividends

SandRidge Mississippian Trust II pays an annual dividend of $0.21 per share and has a dividend yield of 21.4%. Cimarex Energy pays an annual dividend of $0.32 per share and has a dividend yield of 0.2%. SandRidge Mississippian Trust II pays out 87.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Cimarex Energy pays out 8.0% of its earnings in the form of a dividend.

Profitability

This table compares SandRidge Mississippian Trust II and Cimarex Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SandRidge Mississippian Trust II 74.18% 17.64% 17.64%
Cimarex Energy 20.45% 16.11% 8.04%

Insider and Institutional Ownership

0.5% of SandRidge Mississippian Trust II shares are held by institutional investors. Comparatively, 92.0% of Cimarex Energy shares are held by institutional investors. 1.7% of Cimarex Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

SandRidge Mississippian Trust II has a beta of 1, indicating that its share price has a similar volatility profile to the S&P 500.Comparatively, Cimarex Energy has a beta of 1.33, indicating that its share price is 33% more volatile than the S&P 500.

Valuation and Earnings

This table compares SandRidge Mississippian Trust II and Cimarex Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SandRidge Mississippian Trust II $20.41 million 2.39 $16.09 million $0.24 4.08
Cimarex Energy $1.26 billion 9.72 -$408.80 million $4.00 32.06

SandRidge Mississippian Trust II has higher earnings, but lower revenue than Cimarex Energy. SandRidge Mississippian Trust II is trading at a lower price-to-earnings ratio than Cimarex Energy, indicating that it is currently the more affordable of the two stocks.

Summary

Cimarex Energy beats SandRidge Mississippian Trust II on 10 of the 15 factors compared between the two stocks.

SandRidge Mississippian Trust II Company Profile

SandRidge Mississippian Trust II is a statutory trust. The royalty interests conveyed by SandRidge Energy, Inc. (SandRidge) from its interests in certain properties in the Mississippian formation in northern Oklahoma and southern Kansas and held by the Trust are referred to as the Royalty Interests. The Trust holds Royalty Interests in specified oil and natural gas properties. The Royalty Interests entitle the Trust to receive approximately 80% of the proceeds from the sale of oil, natural gas and natural gas liquids (NGLs) production attributable to SandRidge’s net revenue interest in approximately 50 wells producing and over 10 additional wells awaiting (together, the Initial Wells), and over 70% of the proceeds from the sale of oil, natural gas and NGL production attributable to SandRidge’s net revenue interest in approximately 200 horizontal oil and natural gas development wells drilled (the Trust Development Wells) within an area of mutual interest (AMI).

Cimarex Energy Company Profile

Cimarex Energy Co. is an independent oil and gas exploration and production company. The Company operates in exploration and production (E&P) segment. Its operations are located in Oklahoma, Texas and New Mexico. Its E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Its Permian Basin region encompasses west Texas and southeast New Mexico. Its Mid-Continent region consists of Oklahoma and the Texas Panhandle. As of fiscal year ended December 31, 2016 (fiscal 2016), its activities in the Mid-Continent were focused in the Woodford shale and the Meramec horizon, both in Oklahoma. During fiscal 2016, production from the Mid-Continent averaged 457 millions of cubic feet equivalent (MMcfe) per day, or 47% of total company production. All of the Company’s oil and gas assets are located in the United States. As of December 31, 2016, 63% of its total proved reserves were located in the Mid-Continent region and 37% were in the Permian Basin.

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