Archrock, Inc. (NYSE:AROC) Will Pay A US$0.14 Dividend In Four Days
Readers hoping to buy Archrock, Inc. (NYSE:AROC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 7th of May, you won't be eligible to receive this dividend, when it is paid on the 17th of May.
Archrock's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.58 to shareholders. Based on the last year's worth of payments, Archrock has a trailing yield of 6.2% on the current stock price of $9.34. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Archrock
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Archrock lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Archrock didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.
Click here to see how much of its profit Archrock paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Archrock reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Archrock dividends are largely the same as they were seven years ago.
We update our analysis on Archrock every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Has Archrock got what it takes to maintain its dividend payments? It's hard to get used to Archrock paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Archrock has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Archrock you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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