Antero Midstream (NYSE:AM) Is Paying Out A Dividend Of $0.225
Antero Midstream Corporation (NYSE:AM) will pay a dividend of $0.225 on the 10th of August. Based on this payment, the dividend yield on the company's stock will be 9.7%, which is an attractive boost to shareholder returns.
See our latest analysis for Antero Midstream
Antero Midstream Is Paying Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 131% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
Earnings per share is forecast to rise by 32.5% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 131%, which is a bit high and could start applying pressure to the balance sheet.
Antero Midstream's Dividend Has Lacked Consistency
Looking back, Antero Midstream's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was $0.186 in 2017, and the most recent fiscal year payment was $0.90. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Antero Midstream has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Antero Midstream's Dividend Might Lack Growth
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. We are encouraged to see that Antero Midstream has grown earnings per share at 71% per year over the past five years. Although earnings per share is up nicely Antero Midstream is paying out 131% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Antero Midstream (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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