Antero Midstream (NYSE:AM) Has Affirmed Its Dividend Of $0.225
Antero Midstream Corporation's (NYSE:AM) investors are due to receive a payment of $0.225 per share on 9th of August. Based on this payment, the dividend yield on the company's stock will be 7.7%, which is an attractive boost to shareholder returns.
See our latest analysis for Antero Midstream
Antero Midstream Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
The next 12 months is set to see EPS grow by 41.6%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 111% over the next year.
Antero Midstream's Dividend Has Lacked Consistency
Antero Midstream has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $0.186 in 2017 to the most recent total annual payment of $0.90. This means that it has been growing its distributions at 30% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Antero Midstream Might Find It Hard To Grow Its Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Antero Midstream has impressed us by growing EPS at 47% per year over the past five years. While EPS is growing rapidly, Antero Midstream paid out a very high 130% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Antero Midstream has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Antero Midstream (of which 2 are concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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